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EXCEL - IDEA: XBRL DOCUMENT - STRATEGIC INTERNET INVESTMENTS INCFinancial_Report.xls
EX-32.2 - CERTIFICATION - STRATEGIC INTERNET INVESTMENTS INCexhibit32-1.htm
EX-31.1 - CERTIFICATION - STRATEGIC INTERNET INVESTMENTS INCexhibit31-1.htm
 
 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

 [X]   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2012

 [  ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to________________

Commission File Number: 033-28188

STRATEGIC INTERNET INVESTMENTS, INCORPORATED
(Exact name of registrant as specified in its charter)

Delaware   84-1116458
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
24 First Avenue East, STE C
P.O. Box 918
Kalispell, Montana
 
59903
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: 406-552-1170

Securities registered under Section 12(b) of the Act:

None   N/A
Title of each class   Name of each exchange on which registered

Securities registered under Section 12(g) of the Act:
None

Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes  [  ]   No  [X]

Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes  [  ]   No  [X]

Indicate by checkmark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  [X]   No  [  ]


 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes  [X]   No  [  ]

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [X] 

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [  ] Accelerated filer  [  ]
Non-accelerated filer [  ]  (Do not check if a smaller reporting company) Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes  [X]   No  [  ]

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $342,368 based on a price of $0.0124 per share, being the price the common equity last sold on April 26, 2012 as quoted on the OTC Bulletin Board.

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes  [  ]   No  [  ] N/A

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.  33,959,391 common shares issued and outstanding as of March 31, 2013.

DOCUMENTS INCORPORATED BY REFERENCE

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933.  The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).  Not Applicable


 

Part I

Forward Looking Statements.

This annual report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology.  These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled “Risk Factors” and the risks set out below, any of which may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.  These risks include, by way of example and not in limitation:

  • results of initial feasibility, pre-feasibility and feasibility studies, and the possibility that future real estate development results will not be consistent with our expectations;
  • real estate development risks, including risks related to accidents, equipment breakdowns, labour disputes or other unanticipated difficulties or interruptions in development construction;
  • the potential for delays in development activities or the completion of feasibility studies;
  • risks related to the inherent uncertainty of cost estimates and the potential for unexpected costs and expenses;
  • risks related to commodity price fluctuations;
  • the uncertainty of profitability based upon our history of losses;
  • risks related to failure to obtain adequate financing on a timely basis and on acceptable terms for our planned development projects;
  • risks related to environmental regulation and liability;
  • risks that the amounts reserved or allocated for environmental compliance, reclamation, control measures, monitoring and on-going maintenance may not be sufficient to cover such costs;
  • risks related to tax assessments;
  • political and regulatory risks associated with real estate development; and
  • other risks and uncertainties related to our prospects, properties and business strategy.

This list is not an exhaustive list of the factors that may affect any of our forward-looking statements.  These and other factors should be considered carefully and readers should not place undue reliance on our forward-looking statements.

The Company intends that such forward-looking statements be subject to the Safe Harbors for such statements.  Forward looking statements are made based on management’s beliefs, estimates and opinions on the date the statements are made and we undertake no obligation to update forward-looking statements if these beliefs, estimates and opinions or other circumstances should change.  Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are stated in United States dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. 

In this annual report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common stock” refer to the common shares in our capital stock. As used in this annual report, the terms “we”, “us”, “our”, the “Company” and “Strategic” mean Strategic Internet Investments, Incorporated, unless otherwise indicated.


 

ITEM 1.  BUSINESS

Form of Organization

The Company was incorporated in Colorado on February 28, 1989 as Jefferson Capital Corporation.  Effective June 13, 1990 the Company changed its name to Ohio & Southwestern Energy Company.  Effective July 1, 2001, the Company and Strategic Internet Investments, Incorporated (“Strategic”), an inactive Delaware corporation incorporated on March 2, 2001, were merged.  All common shares outstanding of the Company were converted into an equal number of common shares of Strategic.  The purpose of this merger was to change the corporate jurisdiction of the Company from Colorado to Delaware and to change the name of the Company.  The surviving corporation of the merger is Strategic, a Delaware corporation.

Current Business

The Company is in the development stage, accordingly certain matters discussed herein are based on potential future circumstances and developments, which the Company anticipates, but which cannot be assured.

The Company has been devoting its business efforts to real estate development projects.  The Company will continue to explore new investment opportunities, including real estate development projects, during its 2013 fiscal year.

On August 20, 2012, Strategic Internet Investments, Incorporated (“SIII”) signed a Letter of Intent (the "LOI") with G7 Entertainment Limited (“G7”), a private company controlled by Mr. Abbas Salih, a director and officer of SIII. The LOI sets out the terms and conditions that will allow SIII to acquire certain real estate assets located in the United Kingdom (“UK”). The assets are held under contractual rights by G7 as outlined within various Joint Venture Agreements (the "JV Agreements ") between G7 and four UK corporations. The JV Agreements outline the terms and conditions of the formation of a joint venture between G7 and the respective real estate owners whereby G7 intends to facilitate the refinancing of existing mortgages in exchange for a 60% interest in each Joint Venture, which Joint Venture will hold title to the real estate assets.

The LOI outlines the terms and conditions whereby SIII can purchase a 100% interest in the assets at a discounted price (the “SIII Purchase Price”) to the Fair Market Price. The Fair Market Price is to be determined by a mutually acceptable, independent professional real estate evaluator experienced in evaluating the type of assets to be purchased by SIII. The LOI states that the SIII Purchase Price will be equal to the fair market price, as outlined above, minus a discount that will be calculated to be 25% of the total equity contained within the assets (equity Fair Market Price less outstanding mortgage(s) and/or other existing debt of the of the Assets).

The LOI allows for ongoing due diligence which is in process and the completion of a formal purchase agreement between the respective parties.

SIII intends to fund the acquisition of the assets by securing funding by way of equity and or debt financing and cannot predict with any certainty that such funding efforts will be successful and therefore provides a cautionary statement that the success of the contemplated acquisition cannot be assured.

Subsequent to the year end, on February 20, 2013, signed a Memorandum of Understanding (the "MOU") with the following parties: Gary Keeley, Anjum Ahmed, Kevin O’Brien, Milton Thompson and G7 Entertainment Limited (“G7”), a non-arms length private British Columbia Corporation majority controlled by Mr. Abbas Salih, president and CEO of SIII. The MOU sets out the terms and conditions that will allow SIII to acquire up to a majority 80% interest in a private company that will be formed as Special Purpose Vehicle (the “SPV”), in return for funding up to USD $4 million of the SPV’s initial business development.

The SPV will acquire the exclusive worldwide intellectual property (IP) licensing rights, permitting it to design, manufacture (outsourced), market and license out secure RFiD (Radio Frequency Identification) patented security authorization systems developed and patented by Mr. Milton Thompson.

SIII intends to fund the SPV’s business development by securing funding by way of equity and or debt financing and cannot predict with any certainty whether such funding efforts will be successful, and therefore provides a cautionary statement that the success of the contemplated acquisition cannot be assured.


 

Competition

We are a development stage company engaged in the acquisition of a prospective real estate property.  As we currently do not own an interest in any real estate property, we compete with other companies for both the acquisition of prospective properties and the financing necessary to develop such properties.

We conduct our business in an environment that is highly competitive and unpredictable.  In seeking out prospective properties, we have encountered intense competition in all aspects of our proposed business as we compete directly with other development stage companies as well as established international companies.  Many of our competitors are national or international companies with far greater resources, capital and access to information than us.  Accordingly, these competitors may be able to spend greater amounts on the acquisition of prospective properties and on the development of such properties.  In addition, they may be able to afford greater expertise in the development real estate properties.  This competition could result in our competitors having real estate properties of greater quality and attracting prospective investors to finance the development of such properties on more favorable terms.  As a result of this competition, we may become involved in an acquisition with more risk or obtain financing on less favorable terms.

Compliance with Government Regulation

We will not know the government regulations and the cost of compliance with such regulations with which we must comply until such time as we acquire an interest in a particular real estate property.  If we are successful in acquiring a property interest, we will be required to comply with the regulations of governmental authorities and agencies applicable to the federal, state or provincial and local jurisdictions where the property is located.  Development of real estate properties may require prior approval from applicable governmental regulatory agencies.  There can be no assurance that such approvals will be obtained.

If our activities should advance to the point where we engage in real estate development operations, we could become subject to environmental regulations promulgated by federal, state or provincial, and local government agencies as applicable.  Environmental legislation provides for restrictions and prohibitions on real estate development which could result in environmental liability.  A breach or violation of such legislation may result in the imposition of fines and penalties.  In addition, certain types of operations require the submission and approval of environmental impact assessments. Environmental assessments are increasingly imposing higher standards, greater enforcement, fines and penalties for non-compliance.  Environmental assessments of proposed projects carry a heightened degree of responsibility for companies, directors, officers and employees.  The cost of compliance in respect of environmental regulation has the potential to reduce the profitability of any future revenues that our company may generate. 

Employees

The Company currently does not have any employees. All business activities and services are provided by the Company’s directors or consultants.

ITEM 2. PROPERTIES.

The Company does not directly or indirectly own or otherwise have any interest in any other real estate, property, capital assets, or leases of assets.

ITEM 3.  LEGAL PROCEEDINGS.

On January 24, 2013 a vendor filed a claim against the Company for unpaid filing services invoices in the amount of $5,124.00, plus court costs of $326.00. The Company disputes the charges by the vendor on two of the invoices. The full amount of all the unpaid invoices are included in accounts payable at December 31, 2012.

We know of no other material, active, or pending legal proceeding against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation where such claim or action involves damages for more than 10% of our current assets. There are no proceedings in which any of our company’s directors, officers, or affiliates, or any registered or beneficial shareholders, is an adverse party or has a material interest adverse to our company’s interest.


 

ITEM 4. MINE SAFETY DISCLOSURE.

Not applicable.


 

PART II

ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market for Securities

The Company's common shares are quoted and traded on the US OTC Bulletin Board under the symbol "SIII". The range of high and low bid quotations for each quarter within the last two fiscal years, as reported by OTC Markets (www.otcmarkets.com), was as follows: 

Year Period High(1) Low(1)
       
2013 First quarter $0.410 $0.12
       
2012 First quarter $0.015 $0.003
  Second quarter $0.012 $0.003
  Third quarter $0.200 $0.012
  Fourth quarter $0.260 $0.100
       
2011 First quarter $0.008 $0.006
  Second quarter $0.006 $0.004
  Third quarter $0.004 $0.002
  Fourth quarter $0.015 $0.002

           1.       All prices rounded to 3rd decimal place.

These quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not represent actual transactions.

Holders of our Common Stock

As of March 31, 2013, we have approximately 137 registered stockholders and 33,959,391 shares issued and outstanding.

Dividend Policy

We have not paid any cash dividends on our common stock and have no present intention of paying any dividends on the shares of our common stock.  Our future dividend policy will be determined from time to time by our board of directors.

Securities authorized for issuance under equity compensation plans

Equity Compensation Plan Information
Plan category Number of securities to
be issued upon exercise
of outstanding options,
warrants, and rights.
Weighted average
exercise price of
outstanding options,
warrants, and rights.
Number of securities
remaining available for
future issuance.
       
Equity compensation plans approved by security holders - - -
       
Equity compensation plans not approved by security holders 1,200,000 $0.10 2,941,549
       
Total 1,200,000 $0.10 2,941,549


 

2002 Stock Award Plan

In 2002, the Company’s board of directors approved a stock award plan.  The plan provides both for the direct award or sale of shares, and for the grant of options to purchase shares. Shares may be awarded in consideration of services rendered to the Company. The Company may also grant a 30-day right to purchase shares at a price of not less than 90% of the fair market value of the shares.

Under the plan directors, employees and consultants may be granted incentive stock options to purchase common stock of the Company at a price of not less than 100% of the fair market value of the stock.  The total number of shares awarded under the plan must not exceed 15% of the outstanding common stock of the Company.  Certain changes in the capital structure of the Company, such as a stock split or stock dividend, may result in an appropriate adjustment to the number and/or the price of shares issuable under the plan. The plan expires on July 1, 2017.

Sales of Securities Without Registration Under the Securities Act of 1933

On August 10, 2003 the Company entered into a Convertible Loan Facility Agreement with Star Leisure & Entertainment Inc. (“Star Leisure”), a company controlled by a Director and Officer of Strategic, whereby the Company would, from time to time, borrow operating funds from Star Leisure, at an interest rate of 10%, repayable on demand. The lender has the right to convert all or part of the principal sum into units at a conversion rate which is calculated at a discount to the average closing market price for ten days preceding a loan advance. Each unit consists of one common share of the Company and one non-transferable share purchase warrant, expiring 2 years from the conversion date, exercisable at the applicable conversion rate. On August 31, 2008 the Company entered into agreements to transfer previous advances and accrued interest to convertible loans under the Convertible Loan Facility Agreement. At December 31, 2012, the Star Leisure loan principal was $255,209 and had accrued interest of $156,497. The loan principal is convertible into 4,526,436 units at conversion prices ranging from $0.05 to $0.12 as set at the time the principal was borrowed.  Star Leisure has not converted any part of the principal sums advanced into units as of December 31, 2012. This transaction is with an offshore non-U.S. person; accordingly, these securities are exempt from registration pursuant to Regulation S.

On May 5, 2006 the Company entered into a Convertible Loan Facility Agreement with CMB Investments Ltd. (“CMB”), a company controlled by a Director of Strategic, whereby the Company would, from time to time, borrow operating funds from CMB, at an interest rate of ten percent (10%), repayable on demand. The lender has the right to convert all or part of the principal sum into units at a conversion rate which is calculated at a discount to the average closing market price for ten days preceding a loan advance. Each unit consists of one common share of the Company and one share purchase warrant, expiring 2 years from the conversion date, exercisable at the applicable conversion rate. At December 31, 2012, the CMB loan principal was $163,766 and had accrued interest of $105,848. The loan principal is convertible into 2,320,858 units. Conversion of this loan and associated warrants to equity will be at a price ranging from $0.05 to $0.23 as set at the time the principal was borrowed.  CMB has not converted any part of the principal sums advanced into units as of December 31, 2012. This transaction is with an offshore non-U.S. person; accordingly, these securities are exempt from registration pursuant to Regulation S.

On October 15, 2012 the Company entered into three agreements to issue a total of 5,249,065 restricted common shares of the Company at $0.07 per share as settlement of accounts payable due to a director of the Company, a company controlled by a director of the Company, in respect of unpaid management and consulting fee debts totaling $350,215, plus a $17,220 debt owed to an arm’s length creditor. These shares were issued subsequent to the year-end December 31, 2012. These transactions are with offshore non-U.S. persons; accordingly, these securities are exempt from registration pursuant to Regulation S, however they are restricted under Rule 144.

On August 21, 2012 the Company entered into a Management Services Agreement with a director (the “Director”) and an arm’s length consultant (the “Consultant”), for a term of 12 months commencing on October 1, 2012.  As partial remuneration for the management and consulting services the Company agreed to issue 320,000 restricted common shares to the Director, and 480,000 restricted common shares to the Consultant. For services received in the fiscal year ended 


 

December 31, 2012, the Company has recognized share based compensation of $46,000. The shares to be issued were valued upon the quoted market price at December 31, 2012 and subsequent to the year end the shares are to be re-measured until their issuance date. As part of the same agreement, the directors and consultant also received 320,000 and 480,000 stock options respectively with an exercise price of $0.10 expiring October 15, 2017.

On August 21, 2012 the Company entered into a Consulting Services Agreement with an arm’s length consultant (the “Consultant”), for a term of 12 months commencing on October 1, 2012. As partial remuneration for the consulting services the Company agreed to issue 300,000 restricted common shares to the Consultant. For services received in fiscal year ended December 31, 2012, the Company has recognized share based compensation of $17,250. The shares to be issued were valued upon the quoted market price at December 31, 2012 and subsequent to the year end the shares are to be re-measured until their issuance date. As part of the same agreement, the consultant also received 300,000 stock options with an exercise price of $0.10 expiring October 15, 2017.

The total share base payment expenses from the Consulting Services Agreement and the Management Service Agreement is $63,250 in the year ended December 31, 2012.

On March 15, 2013 the Company entered into two consulting services agreements for a term of 12 months commencing on March 15, 2013. As remuneration for the consulting services the Company agreed to issue 1,200,000 restricted common shares to the consultants. These transactions are with offshore non-U.S. persons; accordingly, these securities are exempt from registration pursuant to Regulation S, however they are restricted under Rule 144. These shares had not yet been issued.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

We did not purchase any of our shares of common stock or other securities during the year ended December 31, 2012.

ITEM 6.  SELECTED FINANCIAL DATA.

Not Applicable.

ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this annual report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this annual report.  

Our audited financial statements are stated in United States dollars and are prepared in accordance with United States generally accepted accounting principles (“GAAP”).

Plan of Operation

The Company has been devoting its business efforts to real estate development projects located in Bahrain and Turkey. The Company will continue to explore new investment opportunities, including real estate development projects, during its 2013 fiscal year.

Our estimated cash expenses over the next twelve months are as follows:

Accounting, audit, and legal fees $ 66,000
General and administrative expenses   4,000
Regulatory and transfer agent fees   15,000
  $ 85,000

The Company also estimates it will continue to accrue interest expense of $73,000 over the next 12 months on loans due to related parties. It is not anticipated the interest will be paid in cash during 2013, and therefore interest has been excluded from the above list of cash expenses.

To date we have funded our operations primarily with loans from shareholders and issue new equity.  In addition to funding the Company’s general, administrative and corporate expenses the Company is obligated to address its current obligations totaling $1,596,858. To the extent that cash needs are not achieved from operating cash flow and existing cash on hand, the Company will be required to raise necessary cash through shareholder loans, equity issuances and/or other debt financing. Amounts raised will be used to continue the development of the Company's investment activities, and for other working capital purposes, which may be dilutive to existing shareholders. The Company currently has no agreement in place to raise funds for current liabilities and no guarantee can be given that we will be able to raise funds for this purpose on terms 


 

acceptable to the Company.  Failure to raise funds for general, administrative and corporate expenses and current liabilities could result in a severe curtailment of the company operations.

Any advance in the real estate development strategy set-out herein will require additional funds.  These funds may be raised through equity financing, debt financing or other sources which may result in further dilution of the shareholders percentage ownership in the company.  See “Future Financing” below.

RESULTS OF OPERATIONS 

Our operating results for the years ended December 31, 2012 and 2011 are summarized as follows:

  Year Ended
December 31,
2012
Year Ended
December 31,
2011
Percentage
Increase

(Decrease)
Revenue - - -
Expenses $(606,722) $(139,244) 336%
Other Income (Expense) $(1,807) $5,615 (132%)
Net Loss $(608,529) $(133,629) 355%

Revenues

We have had no operating revenues for the years ended December 31, 2012 and 2011.  We anticipate that we will not generate any revenues for so long as we are a development stage company.

General and Administrative Expenses

The major components of our general and administrative expenses for the years ended December 31, 2012 and 2011 are outlined in the table below:

  Year Ended
December 31,
2012
Year Ended
December 31,
2011
Percentage
Increase

(Decrease)
Accounting, audit fees, and legal fees $64,867 $63,503 2%
Interest 66,143 59,719 11%
Management and consulting fees 459,128 - N/A
Office and communications 1,126 2,775 (59%)
Regulatory and transfer agent fees 15,458 13,247 17%
Total Operating Expenses $606,722 $139,244 336%

The increase in our general and administrative expenses for the year ended December 31, 2012 was primarily due to:

  a) The increase in accounting and audit from 2012 to 2011 due to a general increase in the fees charged by the consultants and professionals who provide these services. In addition, there has been an increase in the amount of time spent by these consultants and professionals to ensure the Company is in compliance with the increased reporting requirement imposed by regulatory authorities.

  b) There was a $6,424 increase in interest expense in 2012 attributed to the compounding effect of interest charged on the loans during the year.

  c) Management and consulting fees totaled $459,128 in 2012, there were no management or consulting contracts in effect during 2011. The 2012 fees relate to contracts with two independent consultants and a management fee with a director.

  d) The 2012 office and general expenses is $1,126 compared to $2,775 in the 2011 period. In 2011 there was an increase in office and general expenses primarily due to an increase in late fees charged by certain vendors on unpaid invoices. These late fees charges were avoided in 2012.


 
  e) Regulatory and transfer agent fees increased $2,211 due to an increase in the fees charged by EDGAR/SEDAR regulatory filing service providers for making submissions to the regulatory authorities, and an increase in the number of filings with the regulatory authorities . This included new charges for submission of financial data in a new XBRL format as required by SEC regulations.

Funding for operating and investing activities was provided by both non-interest and interest bearing advances and loans from related parties, including directors of the Company, and companies controlled by these directors.

LIQUIDITY AND WORKING CAPITAL

As of December 31, 2012, the Company had total current assets of $1,937 and total liabilities of $1,596,858. The Company had cash of $1,937 and a working capital deficiency of $1,594,921 as of December 31, 2012 compared to cash on hand of $161 and a working capital deficiency of $1,443,461 as of December 31, 2011.  We anticipate that we will incur approximately $85,000 for cash operating expenses, including professional, legal and accounting expenses associated with our reporting requirements under the Exchange Act during the next twelve months. In addition to funding the Company’s general, administrative and corporate expenses the Company is obligated to address its current obligations totaling $1,596,858. To the extent that cash needs are not achieved from operating cash flow and existing cash on hand, the Company will be required to raise necessary cash through shareholder loans, equity issuances and/or other debt financing. Amounts raised will be used to continue the development of the Company's investment activities, and for other working capital purposes. Accordingly, we will need to obtain additional financing in order to continue our planned business activities.

Cash used in operating activities for the year ended December 31, 2012 was $74,362 as compared to cash used by operating activities for the same period in 2011 of $79,882.  The decrease in cash used in operating activities was primarily due to the decrease in cash expenditures on accounting, audit, office, and regulatory fees.

The Company has the following loans outstanding as of December 31, 2012:

A $17,000 loan is payable to a company controlled by a director of the Company including accrued interest of $10,199. This loan is unsecured, bearing interest at 12% per annum and is repayable on demand.

Loans totaling $320,625 are payable to companies controlled by directors of the Company.  These loans are unsecured, non-interest bearing, and repayable upon demand.

A $269,614 loan is payable to a company controlled by a director of the Company, including accrued interest payable of $105,848 pursuant to a Convertible Loan Agreement.  The loan is unsecured, bearing interest at 10% per annum and is repayable on demand.  The lender may at anytime convert the principal sum into units of the Company.  Each unit will consist of one common share plus one common share purchase warrant.  The principal sum of $163,766 may be converted into 2,320,858 units.  Conversion of these loans and resulting associated warrants to equity will be based on the conversion price set at the time the principal amount was drawn ranging from $0.05 to $0.23.

A $411,706 loan is payable to a company controlled by a director of the Company, including accrued interest of $156,497 pursuant to a Convertible Loan Agreement.  The loan is unsecured, bearing interest at 10% per annum and is repayable on demand.  The lender may at anytime convert the principal sum into units of the Company.  Each unit will consist of one common share plus one common share purchase warrant.  The principal sum of $255,209 may be converted into 4,526,436 units.  Conversion of this loan and resulting associated warrants to equity will be based on the conversion price set at the time the principal amount was drawn ranging from $0.05 to $0.12.

Going Concern

The audited financial statements accompanying this report have been prepared on a going concern basis, which implies that our company will continue to realize its assets and discharge its liabilities and commitments in the normal course of business. Our company has not generated revenues since inception and has never paid any cash dividends and is unlikely to pay cash dividends or generate earnings in the immediate or foreseeable future. The continuation of our company as a going concern is dependent upon the continued financial support from our shareholders, the ability of our company to obtain necessary equity financing to achieve our operating objectives, and the attainment of profitable operations. As of March 31, 2013, we had cash of $747 and we estimate that we will require approximately $85,000 to fund our business operations over the next twelve months.  In addition to funding the Company’s general, administrative and corporate expenses the Company 


 

is obligated to address its current obligations totaling $1,596,858. To the extent that cash needs are not achieved from operating cash flow and existing cash on hand, the Company will be required to raise necessary cash through shareholder loans, equity issuances and/or other debt financing. Amounts raised will be used to continue the development of the Company's investment activities, and for other working capital purposes. 

Accordingly, we do not have sufficient funds for planned operations and we will be required to raise additional funds for operations subsequent to the year.

These circumstances raise substantial doubt about our ability to continue as a going concern, as described in the explanatory paragraph to our independent auditors’ report on the December 31, 2012 and 2011 financial statements which are included with this annual report. The financial statements do not include any adjustments that might result from the outcome of that uncertainty.

The continuation of our business is dependent upon us raising additional financial support. The issuance of additional equity securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

There are no assurances that we will be able to obtain further funds required for our continued operations. We are pursuing various financing alternatives to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the additional financing on a timely basis, we will be forced to scale down or perhaps even cease the operation of our business.

Future Financings

As of March 31, 2013, we had cash of $747 and we estimate that we will require approximately $85,000 to fund our business operations over the next twelve months. In addition to funding the Company’s general, administrative and corporate expenses the Company is obligated to address its current obligations totaling $1,596,858. Accordingly, we do not have sufficient funds for planned operations and we will be required to raise additional funds for operations after that date.  We anticipate continuing to rely on equity sales of our common shares or shareholder loans in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned activities.   

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Employees

The Company currently has no employees. There are no plans to hire additional employees as administrative requirements at are now being adequately met by the efforts of the directors and consultants. Any land development and construction activities will be conducted through consultants and contractors.

New Accounting Standards

ASU 2011-14. In May 2011, the FASB issued Accounting Standards Update 2011-14, “Fair Value Measurement (Topic 820)”.  This Update will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with US GAAP and International Financial Reporting Standards (“IFRS”).  The amendments in this Update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs and they explain how to measure fair value and they do not require additional fair value measurements and are not intended to establish valuation standards or affect valuation practices outside of financial reporting.  The amendments in this Update apply to all reporting entities that are required or permitted to measure or disclose the fair value of an asset, a liability, or an instrument classified in a reporting entity’s shareholders’ equity in the financial statements. The amendments in this Update are to be applied prospectively.  For public entities, the amendments are effective during interim and annual periods 


 

beginning after December 15, 2011.  The adoption of this standard during the year ended December 31, 2012 did not have a material impact on the Company’s financial statements.

ASU 2011-05. In June 2011, the FASB issued Accounting Standards Update 2011-05, “Presentation of Comprehensive Income (Topic 220)”.  The objective of this Update is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income.  To increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS), the FASB decided to eliminate the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity, among other amendments in this Update.  The amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements.  In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income.  The amendments in this Update should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this standard during the year ended December 31, 2012 did not have a material impact on the Company’s financial statements.

Application of Critical Accounting Estimates  

The financial statements of our company have been prepared in accordance with generally accepted accounting principles in the United States. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment.  The financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below:

The preparation of our financial statements requires management to make estimates and assumptions regarding future events. These estimates and assumptions affect the reported amounts of certain assets and liabilities, and disclosure of contingent liabilities.

Stock-based Compensation
The Company accounts for stock-based compensation using ASC 718 which requires public companies to recognize the cost of services received in exchange for equity instruments, based on the grant-date fair value of those instruments. The Company uses the Black-Scholes option valuation model to calculate stock-based compensation at the date of the grant.  Option valuation models require the input of highly subjective assumptions, including the expected price volatility.  Changes in assumptions can materially affect the fair value estimate.  Compensation expense for unvested options to non-employees is revalued at each period end and is being amortized over the vesting period of the options.

Convertible Instruments and Beneficial Conversion Feature
When the Company issues convertible instruments with detachable instruments, the proceeds of the issuance are allocated between the convertible instrument and other detachable instruments based on their relative fair values pursuant to ASC 470-20 “Application of Issue No. 98-5 to Certain Convertible Instruments.  The resulting discount of the convertible instrument is amortized into income as interest expense over the term of the convertible instrument.  As at December 31, 2012 and 2011, there were no convertible instruments with detachable instruments outstanding.

When the Company issues convertible debt securities with a non-detachable conversion feature that provides for an effective rate of conversion that is below market value on the commitment date, it is known as a beneficial conversion feature (“BCF”). The Company first assessed the convertible debt securities to determine if the embedded conversion feature meets the exemption criteria of paragraph 11(a) of ASC 815 “Accounting for Derivative Instruments and Hedging Activities”. The convertible debt securities outstanding as at December 31, 2012 and 2011, the embedded conversion features met the exemption criteria to be classified as equity instruments. Pursuant to ASC 470-20 “Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios” , the conversion feature of the security that has characteristics of an equity instrument is measured at its intrinsic value at the commitment date and is recorded as additional paid in capital. A portion of the proceeds of the security issued is allocated to the conversion feature equal to its intrinsic value to a maximum of the amount allocated to the convertible instrument.  The resulting discount of the debt instrument is amortized into income as interest expense using the effective interest rate over 


 

the term of the loan.  However, due to demand nature of the convertible debt securities, the discount of the debt instrument was immediately expensed.

These accounting policies are applied consistently for all years presented. Our operating results would be affected if other alternatives were used. Information about the impact on our operating results is included in the notes to our financial statements.


 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)

FINANCIAL STATEMENTS

December 31, 2012 and 2011

(Stated in U.S. Dollars)

 


 
Tel: 604  688 5421
Fax: 604  688 5132
www.bdo.ca
BDO Canada LLP
600 Cathedral Place
925 West Georgia Street
Vancouver BC  V6C 3L2  Canada

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Directors and Stockholders,
Strategic Internet Investments, Incorporated
(A Development Stage Company)

We have audited the accompanying balance sheets of Strategic Internet Investments, Incorporated (the “Company”, a Development Stage Company)  as of December 31, 2012 and 2011 and the statements of operations, cash flows and changes in capital deficit for the years then ended and the period from inception (February 28, 1989) to December 31, 2012.  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits. 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects the financial position of Strategic Internet Investments, Incorporated as of December 31, 2012 and 2011 and the results of its operations and its cash flows for the years then ended and for the period from inception (February 28, 1989) to December 31, 2012, in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has a working capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ BDO Canada LLP

Chartered Accountants

Vancouver, Canada
April 12, 2013

BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.


 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)
BALANCE SHEETS
(Stated in U.S. Dollars)


    December 31,
2012
    December 31,
2011
 
ASSETS            
             
Current            
     Cash $ 1,937   $ 161  
             
  $ 1,937   $ 161  
             
LIABILITIES            
             
Current            
     Accounts payable – Note 6 $ 577,913   $ 566,958  
     Loans payable – Note 3   1,018,945     876,664  
             
TOTAL LIABILITIES   1,596,858     1,443,622  
             
Class A Convertible Preferred stock, $0.001 par value            
     10,000,000 authorized, 198,000 outstanding – Note 5   792,000     792,000  
             
CAPITAL DEFICIT            
             
Capital Stock – Notes 3, 4 and 6            
     Class B Preferred stock, $0.001 par value            
          10,000,000 authorized, none outstanding            
     Common stock, $0.001 par value            
          100,000,000 authorized            
          27,610,326 issued (2011: 27,610,326 issued)   27,610     27,610  
Shares to be issued – Note 4   63,250     -  
Additional paid-in capital – Note 4   8,159,402     7,765,583  
Deficit accumulated during the development stage   (10,637,183 )   (10,028,654 )
             
    (2,386,921 )   (2,235,461 )
             
  $ 1,937   $ 161  

Nature of Operations and Ability to Continue as a Going Concern – Note 1
Commitments – Notes 3 and 6
Subsequent Events – Note 8

SEE ACCOMPANYING NOTES


 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)
 STATEMENTS OF OPERATIONS
(Stated in U.S. Dollars)


    Years ended December 31,     Cumulative from
February 28,
1989 (Date of
Inception) to
December 31,
 
    2012     2011     2012  
                   
General and Administrative Expenses                  
     Accounting and audit fees $ 61,335   $ 63,503   $ 536,416  
     Amortization   -     -     3,616  
     Communications   857     855     108,079  
     Consulting fees – Note 6   235,720     -     3,655,266  
     Interest – Notes 3 and 6   66,143     59,719     635,881  
     Investor relations   -     -     91,385  
     Legal fees   3,532     -     170,216  
     Management fees – Note 6   223,408     -     769,733  
     Office and general   269     1,920     145,602  
     Regulatory fees   13,958     11,747     66,373  
     Rent – Note 6   -     -     135,615  
     Transfer agent fees   1,500     1,500     49,008  
     Travel   -     -     122,770  
     Loss on disposal of equipment   -     -     1,481  
     Write-down of advances to related party   -     -     606,337  
                   
Operating loss   (606,722 )   (139,244 )   (7,087,778 )
                   
     Unauthorized distribution   -     -     (69,116 )
     Termination fee   -     -     (792,000 )
     Gain (loss) on foreign exchange   (1,807 )   5,615     (39,894 )
     Gain on settlement of payables   -     -     25,233  
     Write-down of deferred costs   -     -     (34,210 )
                   
Net loss for the period $ (608,529 ) $ (133,629 ) $ (7,997,765 )
                   
Basic and diluted loss per share $ (0.02 ) $ (0.00 )      
                   
Weighted average common shares outstanding   27,885,326     27,610,326        

SEE ACCOMPANYING NOTES


 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)
 STATEMENTS OF CASH FLOWS
(Stated in U.S. Dollars)


    Years ended December 31,     Cumulative from
February 28, 1989
(Date of Inception) to
December 31,
 
    2012     2011     2012  
Operating Activities                  
     Net loss for the period $ (608,529 ) $ (133,629 ) $ (7,997,765 )
     Adjustments to reconcile net loss to net cash used in operating activities:                  
          Amortization   -     -     3,616  
          Beneficial conversion feature on convertible debt   -     -     239,662  
          Communications   -     -     28,000  
          Consulting fees   44,850     -     2,523,404  
          Gain on settlement of payables   -     -     (25,233 )
          Interest accrued on loans   66,143     59,719     272,541  
          Legal fees   -     -     25,000  
          Loss on disposal of equipment   -     -     1,481  
          Management fees   18,400     -     25,400  
          Stock-based compensation   393,818     -     1,129,871  
          Termination fees   -     -     792,000  
          Write-down of deferred costs   -     -     34,210  
          Write-down of advances to related party   -     -     606,337  
     Changes in non-cash item:                  
          Prepaid expenses   -     322     -  
          Accounts payable   10,956     (6,294 )   715,860  
                   
Net cash used in operating activities   (74,362 )   (79,882 )   (1,625,616 )
                   
Investing Activities                  
     Organization costs   -     -     (750 )
     Acquisition of equipment   -     -     (4,347 )
     Deferred costs   -     -     (34,210 )
     Advances to related party   -     -     (606,337 )
                   
Net cash used in investing activities   -     -     (645,644 )
                   
Financing Activities                  
     Loans payable   76,138     79,807     1,099,868  
     Due to related parties   -     -     15,526  
     Proceeds from issuance of common stock   -     -     1,162,631  
     Payment of offering costs   -     -     (30,270 )
     Additional paid-in capital   -     -     25,442  
                   
Net cash provided by financing activities   76,138     79,807     2,273,197  
                   
Increase (decrease) in cash during the period   1,776     (75 )   1,937  
                   
Cash, beginning of the period   161     236     -  
                   
Cash, end of the period $ 1,937   $ 161   $ 1,937  
                   
Supplementary disclosure of cash flows:                  
     Cash paid for Interest $ -   $ -   $ 93,859  

Non-cash Transactions – Note 5

SEE ACCOMPANYING NOTES


 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)
STATEMENTS OF CHANGES IN CAPITAL DEFICIT
For the period from February 28, 1989 (Date of Inception) to December 31, 2012
(Stated in U.S. Dollars)


                    Deficit    
            Common       Accumulated    
            Shares   Additional   During the    
    Common Stock   to be   Paid-In   Development    
    Shares   Par Value   Issued   Capital   Stage   Total
                         
Balance, February 28, 1989   - $ - $ - $ - $ - $ -
     Issuance of stock to insiders on
     March 7, 1989 – at $0.30
  33,347   33   -   9,967   -   10,000
                         
Balance December 31, 1989   33,347   33   -   9,967   -   10,000
     Issuance of stock during public
     offering for $3.00 per share, net of
     offering costs of $27,270
  33,348   33   -   72,697   -   72,730
     Net loss   -   -   -   -   (84,159)   (84,159)
                         
Balance, December 31, 1990   66,695   66   -   82,664   (84,159)   (1,429)
     Net loss   -   -   -   -   (3,416)   (3,416)
                         
Balance, December 31, 1991   66,695   66   -   82,664   (87,575)   (4,845)
     Net loss   -   -   -   -   (2,713)   (2,713)
                         
Balance, December 31, 1992   66,695   66   -   82,664   (90,288)   (7,558)
     Net loss   -   -   -   -   (1,614)   (1,614)
                         
Balance, December 31, 1993   66,695   66   -   82,664   (91,902)   (9,172)
     Net loss   -   -   -   -   (1,863)   (1,863)
                         
Balance December 31, 1994   66,695   66   -   82,664   (93,765)   (11,035)
     Issuance of stock for service
     rendered – at $0.03
  50,000   50   -   1,450   -   1,500
     Contributed capital   -   -   -   24,842   -   24,842
     Net loss   -   -   -   -   (16,735)   (16,735)
                         
Balance, December 31, 1995   116,695   116   -   108,956   (110,500)   (1,428)
     Net loss   -   -   -   -   (9,068)   (9,068)
                         
Balance December 31, 1996   116,695   116   -   108,956   (119,568)   (10,496)
     Issuance of stock for cash - at $0.011   2,000,000   2,000   -   19,300   -   21,300
     Contributed capital   -   -   -   600   -   600
     Net loss   -   -   -   -   (22,261)   (22,261)
                         
Balance, December 31, 1997   2,116,695   2,116   -   128,856   (141,829)   (10,857)
     Issuance of stock services                        
     - at $0.001   7,000,000   7,000   -   -   -   7,000
     - at $0.01   620,000   620   -   5,580   -   6,200
     Net loss   -   -   -   -   (52,308)   (52,308)
                         
Balance, December 31, 1998   9,736,695   9,736   -   134,436   (194,137)   (49,965)
     Net loss   -   -   -   -   (35,995)   (35,995)

…Cont’d

SEE ACCOMPANYING NOTES


 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)
STATEMENTS OF CHANGES IN CAPITAL DEFICIT
For the period from February 28, 1989 (Date of Inception) to December 31, 2012
(Stated in U.S. Dollars)


                    Deficit    
            Common       Accumulated    
            Shares   Additional   During the    
    Common Stock   to be   Paid-In   Development    
    Shares   Par Value   Issued   Capital   Stage   Total
                         
Balance, December 31, 1999   9,736,695 $ 9,736 $ - $ 134,436 $ (230,132) $ (85,960)
                         
     Issuance of stock for cash pursuant to a
     private placement – at $0.30
  1,133,334   1,133   -   338,867   -   340,000
     Issue of stock for finders’ fee   50,000   50   -   (50)   -   -
     Net loss   -   -   -   -   (336,431)   (336,431)
     Non-cash compensation charge   -   -   -   78,707   -   78,707
                         
Balance December 31, 2000   10,920,029   10,919   -   551,960   (566,563)   (3,684)
     Issuance of stock for services – at $0.50   328,356   328   -   163,851   -   164,179
     - at $1.55   13,383   13   -   20,731   -   20,744
     - at $3.50   366,667   367   -   1,282,964   -   1,283,331
     Issuance of stock for cash pursuant
     to a private placement - at $0.30
  883,332   883   -   264,117   -   265,000
     Issuance of stock pursuant to the
     exercise of warrants - at $2.00
  28,800   29   -   57,571   -   57,600
     Less: Issue costs   -   -   -   (17,858)   -   (17,858)
     Net loss   -   -   -   -   (2,296,406)   (2,296,406)
     Non-cash compensation charge   -   -   -   136,378   -   136,378
                         
Balance, December 31, 2001   12,540,567   12,539   -   2,459,714   (2,862,969)   (390,716)
     Issuance of stock for prepaid consulting                   -    
     - at $0.35   80,000   80   -   27,920   -   28,000
     Issuance of stock for deferred costs - at $0.05   1,300,000   1,300   -   63,700   -   65,000
     Issuance of stock for services – at $0.05   100,000   100   -   4,900   -   5,000
     - at $0.055   60,000   60   -   3,240   -   3,300
     - at $0.10   105,000   105   -   10,395   -   10,500
     - at $0.148   27,000   27   -   3,973   -   4,000
     - at $0.20   175,000   175   -   34,825   -   35,000
     - at $0.209   17,143   17   -   3,583   -   3,600
     - at $0.35   120,000   120   -   41,880   -   42,000
     Issuance of stock for debt – at $0.20   458,135   458   -   91,169   -   91,627
     - at $0.209   222,751   223   -   46,156   -   46,379
     Net loss   -   -   -   -   (214,758)   (214,758)
                         
Balance, December 31, 2002   15,205,596   15,204   -   2,791,455   (3,077,727)   (271,068)
     Non-cash compensation charge   -   -   -   53,500   -   53,500
     Issue of stock for services – at $0.14   1,450,000   1,450   -   201,550   -   203,000
     Issue of stock for cash pursuant to a
     private placement – at $0.10
  650,000   650   -   64,350   -   65,000
     Net loss   -   -   -   -   (1,208,941)   (1,208,941)

…Cont’d

SEE ACCOMPANYING NOTES


 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)
STATEMENTS OF CHANGES IN CAPITAL DEFICIT
For the period from February 28, 1989 (Date of Inception) to December 31, 2012
(Stated in U.S. Dollars)


                    Deficit    
            Common       Accumulated    
            Shares   Additional   During the    
    Common Stock   to be   Paid-In   Development    
    Shares   Par Value   Issued   Capital   Stage   Total
                         
Balance, December 31, 2003   17,305,596 $ 17,304 $ - $ 3,110,855 $ (4,286,668) $ (1,158,509)
     Non-cash compensation charge   -   -   -   161,450   -   161,450
     Issue of stock for cash pursuant to
     the exercise of warrants – at 0.10
  320,000   320   -   31,680   -   32,000
     – at $0.05   643,715   644   -   31,542   -   32,186
     Issue of stock for cash pursuant to
     the exercise of options – at $0.25
  205,000   205   -   51,045   -   51,250
     Issue of stock for debt – at $0.05   563,000   563   -   29,437   -   30,000
     – at $0.06   825,364   825   -   47,712   -   48,537
     – at $0.30   50,000   50   -   14,950   -   15,000
     Issuance of stock for
     Services – at $2.00
  10,000   10   -   19,990   -   20,000
     – at $0.35   350,000   350   -   122,150   -   122,500
     Cancellation of stock issued for
     deferred Investment costs – at $0.05
  (1,300,000)   (1,300)   -   (63,700)   -   (65,000)
     Net loss   -   -   -   -   (517,324)   (517,324)
                         
Balance, December 31, 2004   18,972,675   18,971   -   3,557,111   (4,803,992)   (1,227,910)
     Non-cash compensation charge   -   -   -   25,700   -   25,700
     Issue of stock for cash pursuant to
     the exercise of warrants – at $0.07
  75,820   76   -   5,232   -   5,308
     – at $0.10   357,760   358   -   35,417   -   35,775
     – at $0.11   299,724   300   -   31,270   -   31,570
     – at $0.21   16,803   17   -   3,483   -   3,500
     Issue of stock for debt – at $0.39   635,901   636   -   249,524   -   250,160
     Issuance of stock for
     services – at $0.25
  950,000   950   -   236,550   -   237,500
     – at $0.36   100,000   100   -   35,900   -   36,000
     – at $0.50   121,000   121   -   60,379   -   60,500
     – at $0.54   20,000   20   -   10,680   -   10,700
     – at $0.84   50,000   50   -   41,950   -   42,000
     Issuance of stock dividend – at $0.65   4,060,643   4,061   -   2,635,357   (2,639,418)   -
     Net loss   -   -   -   -   (517,270)   (517,270)
                         
Balance, December 31, 2005   25,660,326   25,660   -   6,928,553   (7,960,680)   (1,006,467)
                         
     Issue of stock for cash pursuant to a
     private placement – at $0.40
  200,000   200   -   79,800   -   80,000
     Issue of stock for finder’s
     fee – at $0.40
  100,000   100   -   39,900   -   40,000
     Share issue costs   -   -   -   (43,000)   -   (43,000)
     Beneficial conversion feature on
     convertible debt
  -   -   -   77,800   -   77,800
     Net loss   -   -   -   -   (401,655)   (401,655)

…Cont’d

SEE ACCOMPANYING NOTES


 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)
STATEMENTS OF CHANGES IN CAPITAL DEFICIT
For the period from February 28, 1989 (Date of Inception) to December 31, 2012
(Stated in U.S. Dollars)


                    Deficit    
            Common       Accumulated    
            Shares   Additional   During the    
    Common Stock   to be   Paid-In   Development    
    Shares   Par Value   Issued   Capital   Stage   Total
                         
Balance, December 31, 2006   25,960,326 $ 25,960 $ - $ 7,083,053 $ (8,362,335) $ (1,253,322)
     Issue of stock for cash pursuant to a
     private placement – at $0.25
  200,000   200   -   49,800   -   50,000
     Issuance of stock for services
     – at $0.20
  700,000   700   -   139,300   -   140,000
     Non-cash compensation charge   -   -   -   29,240   -   29,240
     Beneficial conversion feature on convertible debt   -   -   -   39,600   -   39,600
     Net loss   -   -   -   -   (519,345)   (519,345)
                         
Balance, December 31, 2007   26,860,326   26,860   -   7,340,993   (8,881,680)   (1,513,827)
     Issuance of stock for services
     – at $0.07
  750,000   750   -   51,250   -   52,000
     Non-cash compensation charge   -   -   -   251,078   -   251,078
     Beneficial conversion feature on convertible debt   -   -   -   122,262   -   122,262
     Net loss   -   -   -   -   (723,811)   (723,811)
                         
Balance, December 31, 2008   27,610,326   27,610   -   7,765,583   (9,605,491)   (1,812,298)
     Net loss   -   -   -   -   (154,805)   (154,805)
                         
Balance, December 31, 2009   27,610,326   27,610   -   7,765,583   (9,760,296)   (1,967,103)
     Net loss   -   -   -   -   (134,729)   (134,729)
                         
Balance, December 31, 2010   27,610,326   27,610   -   7,765,583   (9,895,025)   (2,101,832)
     Net loss   -   -   -   -   (133,629)   (133,629)
                         
Balance, December 31, 2011   27,610,326   27,610   -   7,765,583   (10,028,654)   (2,235,461)
     Shares to be issued for consulting
     and management services
  -   -   63,250   -   -   63,250
     Non-cash compensation charge   -   -   -   393,819   -   393,819
     Net loss   -   -   -   -   (608,529)   (608,529)
                         
Balance, December 31, 2012   27,610,326 $ 27,610 $ 63,250 $ 8,159,402 $ (10,637,183) $ (2,386,921)

SEE ACCOMPANYING NOTES


 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2012 and 2011
(Stated in U.S. Dollars)


1.
Nature of Operations and Ability to Continue as a Going Concern

  The Company is in the development stage and is devoting its efforts to exploring new investment opportunities, including real estate development projects.

  These financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which assumes that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern. At December 31, 2012, the Company had not yet achieved profitable operations, has an accumulated deficit of $10,637,183 since its inception, has a working capital deficiency of $1,594,921 and expects to incur further losses in the development of its business, all of which casts substantial doubt about the Company’s ability to continue as a going concern. Management anticipates that it requires approximately $85,000 over the twelve months ended December 31, 2013 to continue operations as well as the Company estimates it will accrue interest expenses of $73,000 over the next 12 months on loans due to related parties. In addition to funding the Company’s general, administrative and corporate expenses the Company is obligated to address its current obligations totaling $1,596,858. To the extent that cash needs are not achieved from operating cash flow and existing cash on hand, the Company will be required to raise necessary cash through shareholder loans, equity issuances and/or other debt financing. Amounts raised will be used to continue the development of the Company's investment activities, and for other working capital purposes, which may be dilutive to existing shareholders. The Company currently has no agreement in place to raise funds for current liabilities and no guarantee can be given that we will be able to raise funds for this purpose on terms acceptable to the company. Failure to raise funds for general, administrative and corporate expenses and current liabilities could result in a severe curtailment of the company operations.

  The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has no formal plan in place to address this concern but considers that the Company will be able to obtain additional funds by equity financing and/or related party advances; however there is no assurance of additional funding being available. The Company has historically satisfied its capital needs primarily by issuing equity securities and/or related party advances. Management plans to continue to provide for its capital needs during the year ended December 31, 2013, by issuing equity securities and/or related party advances.

  The Company was incorporated in Colorado on February 28, 1989 as Jefferson Capital Corporation. Effective June 13, 1990 the Company changed its name to Ohio & Southwestern Energy Company. Effective July 1, 2001, the Company and Strategic Internet Investments, Incorporated (“Strategic”), an inactive Delaware corporation incorporated on March 2, 2001, were merged. All common shares outstanding of the Company were converted into an equal number of common shares of Strategic. The purpose of this merger was to change the corporate jurisdiction of the Company from Colorado to Delaware and to change the name of the Company. The surviving corporation of the merger is Strategic, a Delaware corporation.

2. Summary of Significant Accounting Policies

  The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates, which have been made using careful judgment. Actual results may differ from those estimates.


 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2012 and 2011
(Stated in U.S. Dollars)


2. Summary of Significant Accounting Policies – (cont’d)

  The financial statements have, in management’s opinion, been properly prepared within the framework of the significant accounting policies summarized below:

  Development Stage Company

  The Company is a development stage company and is devoting substantially all of its present efforts to establish a new business and none of its planned principal operations have commenced. All losses accumulated since inception have been considered as part of the Company’s development stage activities.

  Income Taxes

  The Company accounts for income taxes in accordance with Accounting Standards Codification ("ASC") 740, Income Taxes ("ASC 740"). There are two major components of income tax expense, current and deferred. Current income tax expense approximates cash to be paid or refunded for taxes for the applicable period. Deferred tax assets and liabilities are determined based upon the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates, which will be in effect when these differences reverse. Deferred tax expense or benefit is the result of changes between deferred tax assets and liabilities.

  A valuation allowance is established when, based on an evaluation of objective verifiable evidence, it is more likely than not that some portion or all of deferred tax assets will not be realized.

  The Company recognizes the impact of an uncertain income tax position at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority and includes consideration of interest and penalties. An uncertain income tax position will not be recognized if it has a 50% or less likelihood of being sustained. The liability for unrecognized tax benefits is classified as non-current unless the liability is expected to be settled in cash within 12 months of the reporting date.

  The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the statements of operations. Accrued interest and penalties are included within unrecognized tax benefits and other long-term liabilities line in the balance sheet.

  Basic Loss Per Share

  The basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per share except that the denominator is increased to include the number of additional shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. In addition, in computing the dilutive effect of convertible securities, the numerator is adjusted to add back any convertible preferred dividend and the after-tax amount of interest in the period associated with any convertible debt. The numerator is also adjusted for any other changes in income or loss that would result from the assumed conversion of these potential common shares. The if-converted method is used in calculating diluted loss per share for the convertible debentures. The treasury stock method is used in calculating diluted loss per share, which assumes that any proceeds received from the exercise of in-the-money stock options and share purchase warrants would be used to purchase common shares at the average market price for the period.

  Common share equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method, and the dilutive effect of the assumed conversion of convertible debt and convertible preferred shares, using the if-converted method, only if the common stock equivalents are considered dilutive based upon the Company’s net loss position at the calculation date.


 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2012 and 2011
(Stated in U.S. Dollars)


2. Summary of Significant Accounting Policies – (cont’d)

  Basic Loss Per Share – (cont’d)

  At December 31, 2012, the Company had 15,422,588 (2011 – 17,397,588) common share equivalents in respect to convertible preferred shares, stock options, and convertible debt. Because the Company incurred a loss, diluted loss per share is the same as basic loss per share.

  Foreign Currency Translation

  Foreign currency transactions are translated into U.S. dollars, the functional and reporting currency, by the use of the exchange rate in effect at the date of the transaction, in accordance with ASC 830, Foreign Currency Matters. At each balance sheet date, recorded balances that are denominated in a currency other than U.S. dollars are adjusted to reflect the current exchange rate. Any exchange gains or losses are included in the Statements of Operations.

  Financial Instruments

  The carrying value of cash, accounts payable, and loans payable approximates fair value because of the demand or short term to maturity of such instruments. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.

  As a basis for considering market participant assumptions in fair value measurements, ASC 820-10 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

  The fair value hierarchy, as defined by ASC 820-10, contains three levels of inputs that may be used to measure fair value as follows:

 
  • Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities;
  • Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals; and
  • Level 3 inputs are unobservable inputs for the asset or liability which are typically based on an entity’s own assumptions, as there is little, if any, related market activity.

  In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.


 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2012 and 2011
(Stated in U.S. Dollars)


2. Summary of Significant Accounting Policies – (cont’d)

  Financial Instruments – (cont’d)

  Please refer to the table below for the fair values of our financial instruments.

  Fair Value of Financial Instruments:

  December 31, 2012 December 31, 2011  
Assets Carrying
Amount
Fair Value Carrying
Amount
Fair Value Fair Value Levels
Cash 1,937 1,937 161 161 1
           
Liabilities          
Loans
payable
1,018,945 1,018,945 876,664 876,664 2

  The Company’s loan’s payable is based on Level 2 inputs in the ASC 820 fair value hierarchy. Based on the borrowing rates currently available to the Company for loans with similar term. As the loans payable are due on demand or past their maturity, their fair values would approximate their carrying amounts.

  Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). There were no assets or liabilities measured at fair value on a nonrecurring basis during the periods ended December 31, 2012 and 2011.

  Stock-based Compensation

  The Company accounts for stock-based compensation using ASC 718 which requires public companies to recognize the cost of services received in exchange for equity instruments, based on the grant-date fair value of those instruments. The Company uses the Black-Scholes option valuation model to calculate stock-based compensation at the date of the grant. Option valuation models require the input of highly subjective assumptions, including the expected price volatility. Changes in assumptions can materially affect the fair value estimate. Compensation expense for unvested options to non-employees is revalued at each period end and is being amortized over the vesting period of the options.


 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2012 and 2011
(Stated in U.S. Dollars)


2. Summary of Significant Accounting Policies – (cont’d)

  Convertible Instruments and Beneficial Conversion Feature

  When the Company issues convertible instruments with detachable instruments, the proceeds of the issuance are allocated between the convertible instrument and other detachable instruments based on their relative fair values. The resulting discount of the convertible instrument is amortized into income as interest expense over the term of the convertible instrument. As at December 31, 2012 and 2011, there were no convertible instruments with detachable instruments outstanding.

  When the Company issues convertible debt securities with a non-detachable conversion feature that provides for an effective rate of conversion that is below market value on the commitment date, it is known as a beneficial conversion feature (“BCF”). For the convertible debt securities outstanding as at December 31, 2012 and 2011, the embedded conversion features met the exemption criteria to be classified as equity instruments. The conversion feature of the security that has characteristics of an equity instrument is measured at its intrinsic value at the commitment date and is recorded as additional paid in capital. A portion of the proceeds of the security issued is allocated to the conversion feature equal to its intrinsic value to a maximum of the amount allocated to the convertible instrument. The resulting discount of the debt instrument is amortized into income as interest expense using the effective interest rate over the term of the loan. However, due to demand nature of the convertible debt securities, the discount of the debt instrument was immediately expensed.

  New Accounting Standards

  ASU 2011-14. In May 2011, the FASB issued Accounting Standards Update 2011-14, “Fair Value Measurement (Topic 820)”. This Update will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with US GAAP and International Financial Reporting Standards (“IFRS”). The amendments in this Update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRSs and they explain how to measure fair value and they do not require additional fair value measurements and are not intended to establish valuation standards or affect valuation practices outside of financial reporting. The amendments in this Update apply to all reporting entities that are required or permitted to measure or disclose the fair value of an asset, a liability, or an instrument classified in a reporting entity’s shareholders’ equity in the financial statements. The amendments in this Update are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. The adoption of this standard during the year ended December 31, 2012 did not have a material impact on the Company’s financial statements.

  ASU 2011-05. In June 2011, the FASB issued Accounting Standards Update 2011-05, “Presentation of Comprehensive Income (Topic 220)”. The objective of this Update is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. To increase the prominence of items reported in other comprehensive income and to facilitate convergence of U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS), the FASB decided to eliminate the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity, among other amendments in this Update. The amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement approach, the first statement should present total net income and its components followed consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive income. The amendments in this Update should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this standard during the year ended December 31, 2012 did not have a material impact on the Company’s financial statements.


 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2012 and 2011
(Stated in U.S. Dollars)


3. Loans Payable

 
        December 31,     December 31,  
        2012     2011  
                 
  a)
Loan payable to a company controlled by a director of the Company including accrued interest of $10,198 (2011 - $8,298).  The loan is unsecured, bearing interest at 12% per annum and is repayable on demand.
$ 17,000   $ 15,100  
                 
  b)
Loans payable to companies controlled by directors of the Company.  The loans are unsecured, non-interest bearing, and repayable upon demand.
  320,625     244,487  
                 
  c)
Loan payable to a company controlled by a director of the Company, including accrued interest payable of $105,848 (2011 - $80,426), pursuant to a Convertible Loan Agreement.  The loan is unsecured, bearing interest at 10% per annum and is repayable on demand.  The lender may at anytime convert the principal sum into units of the Company.  Each unit will consist of one common share plus one common share purchase warrant. Each warrant is exercisable for a period of 2 years from the date of conversion at a price ranging from $0.05 to $0.23. The principal sum of $163,766 may be converted into 2,320,858 units. Conversion of these loans and resulting associated warrants to equity will be based on the conversion price set at the time the principal amount was drawn ranging from $0.05 to $0.23.  Upon conversion of this loan, the $73,685 fair value of the warrants will be recognized as an interest expense and credited to additional paid-in capital.
  269,614     244,192  
                 
  d)
Loan payable to a company controlled by a director of the Company, including accrued interest of $156,497 (2011 - $117,676), pursuant to a Convertible Loan Agreement.  The loan is unsecured, bearing interest at 10% per annum and is repayable on demand.  The lender may at anytime convert the principal sum into units of the Company.  Each unit will consist of one common share plus one common share purchase warrant.  Each warrant is exercisable for a period of 2 years from the date of conversion at a price ranging from $0.05 to $0.12. The principal sum of $255,209 may be converted into 4,526,436 units.  Conversion of this loan and resulting associated warrants to equity will be based on the conversion price set at the time the principal amount was drawn ranging from $0.05 to $0.12. Upon conversion of this loan, the $113,338 fair value of the warrants will be recognized as an interest expense and credited to additional paid-in capital.
  411,706     372,885  
                 
      $ 1,018,945   $ 876,664  


 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2012 and 2011
(Stated in U.S. Dollars)


4. Capital Stock – Notes 3 and 5

  Class A Convertible Preferred Shares

  The Class A convertible preferred shares issued in 2003 have a par value of $0.001 and are convertible to common shares at $4.00 per share during the first 180 days following issuance, and thereafter at the average of twenty consecutive days closing prices, but shall not be less than $1.50 per share or greater than $6.00 per share. The Company has the right to redeem its Class A convertible preferred stock at any time by paying to the holders thereof the sum of $4 per share.

  The aggregate liquidation value of the Class A convertible preferred shares is $792,000. A merger or consolidation of the Company that results in the Company’s stockholders immediately prior to the transaction not holding at least 50% of the voting power of the surviving entity shall be deemed a liquidation event.

  Stock Option Plan

  The Company’s board of directors approved a stock option plan. Under the plan directors, employees and consultants may be granted options to purchase common stock of the Company at a price of not less than 100% of the fair market value of the stock. The total number of options granted must not exceed 15% of the outstanding common stock of the Company. The plan expires on July 1, 2017.

  Stock-based Compensation

  In 2008, the Company granted 3,125,000 share purchase options to directors, employees, and consultants of the Company at the closing price of the Company’s common stock on the date of the grants or $0.15. The options were granted with a term of 5 years. All of these options were cancelled in 2012.

  During the year ended December 31, 2012, the Company granted 4,140,000 (2011 – $Nil) vested share purchase options to certain directors and consultants of the Company entitling them to acquire 4,140,000 (2011 – Nil) common shares at $0.10 per share, which was $0.13 lower than the Company’s common stock price on the date of grant. Out of these stock options granted, 2,800,000 options were issued to one independent consultant, two directors, and a company controlled by a director that were deemed to be part of a stock option modification relating to the 2012 stock cancellation. The total incremental compensation resulting from the modification was $87,360.

  The 4,140,000 options have been granted with a term of 5 years (2011 – N/A) expiring on October 15, 2017. The Company has charged a total of $190,870 (2011 - $Nil) to consulting fees and $202,949 (2011 - $Nil) to management fees on the statement of operations as compensation expense, including the modification expense, for share purchase options awarded to directors and consultants during the period ended December 31, 2012.

  Of these 4,140,000 options granted in fiscal 2012, 2,940,000 were subsequently cancelled in November 2012. The cancelled options were originally issued to one arms-length consultant and two directors. Options were granted to the same parties at $0.12 on January 16, 2013 with a term of 5 year expiring on Jan 16, 2018.

  The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option valuation model. The Black-Scholes option valuation model requires the input of highly subjective assumptions including the expected price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate and therefore the Black-Scholes model does not necessarily provide a reliable single measure of the fair value of the Company’s share purchase options.


 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2012 and 2011
(Stated in U.S. Dollars)


4. Capital Stock – Notes 3 and 5 – (cont’d)

  The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option valuation model with the following weighted average assumptions:

  2012 2011
     
Expected dividend yield 0.0% -
Expected volatility 235% -
Risk-free Interest Rate 0.67% -
Expected term in years 5 -

  The expected volatility is calculated based on the Company’s historical share price. The weighted average fair value of options granted during the year was $0.23.

  During the previous two years ended December 31, 2012, the change in share purchase options outstanding are as follows:

      Options     Weighted
Average
Exercise
Price
    Aggregate
Intrinsic
Value
 
                     
  Options outstanding at December 31, 2010   3,175,000   $ 0.15   $ -  
  Cancelled during the year   (50,000 ) $ 0.15   $ -  
  Options outstanding at December 31, 2011   3,125,000   $ 0.15   $ -  
  Granted during the year   4,140,000   $ 0.10   $ -  
  Cancelled during the year   (6,065,000 ) $ 0.15   $ -  
  Options outstanding at December 31, 2012   1,200,000   $ 0.10   $ 156,000  

  At December 31, 2012, the Company had share purchase options outstanding as follows:

Number of Options Exercise Price Expiry Date
     
1,200,000 $0.10 October 15, 2017

  At December 31, 2012 and December 31, 2011 all of the outstanding share purchase options were exercisable. The weighted average remaining contractual life is 4.79 years.


 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2012 and 2011
(Stated in U.S. Dollars)


4. Capital Stock – Notes 3 and 5 – (cont’d)

  Shares to be issued

  On August 21, 2012 the Company entered into a Management Services Agreement with a director (the “Director”) and an arm’s length consultant (the “Consultant”), for a term of 12 months commencing on October 1, 2012. As partial remuneration for the management and consulting services the Company agreed to issue 320,000 restricted common shares to the Director, and 480,000 restricted common shares to the Consultant. For services received in the year ended December 31, 2012, the Company has recognized share based compensation of $46,000. The shares to be issued were valued upon the quoted market price at December 31, 2012 and subsequent to the year end the shares are to be re-measured until their issuance date. As part of the same agreement, the director and consultant also received 320,000 and 480,000 stock options respectively. Options were granted before year end and discussed above under stock base compensation

  On August 21, 2012 the Company entered into a Consulting Services Agreement with an arm’s length consultant (the “Consultant”), for a term of 12 months commencing on October 1, 2012. As partial remuneration for the consulting services the Company agreed to issue 300,000 restricted common shares to the Consultant. For services received in the year ended December 31, 2012, the Company has recognized share based compensation of $17,250. The shares to be issued were valued upon the quoted market price at December 31, 2012 and subsequent to the year end the shares are to be re-measured until their issuance date. As part of the same agreement, the consultant also received 300,000 stock options. Options were granted before year end and discussed above under stock base compensation


 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2012 and 2011
(Stated in U.S. Dollars)


5. Non-Cash Transactions

  Investing and financing activities that do not have a direct impact on cash flows are excluded from the statements of cash flows. The Company issued common shares for settlement of debts, convertible loans, and for services provided to the Company during the following years:

  Year     Number of
Preferred
Shares
    Number of
Common Shares
    Weighted
Average Price
Per Share
    Total  
                             
  1995 Consulting fee   -     50,000   $ 0.03   $ 1,500  
  1998 Management fee   -     7,000,000   $ 0.001     7,000  
  1998 Consulting fee   -     620,000   $ 0.01     6,200  
  2000 Finders fee   -     50,000   $ 0.001     50  
  2001 Consulting fee   -     708,406   $ 2.07     1,468,254  
  2002 Deferred cost   -     1,300,000   $ 0.05     65,000  
  2002 Consulting fee   -     684,143   $ 0.19     131,400  
  2002 Debt settlement   -     680,886   $ 0.20     138,006  
  2003 Consulting fee   -     1,450,000   $ 0.14     203,000  
  2003 Termination fee   198,000     -   $ 4.00     792,000  
  2004 Loan conversion   -     825,364   $ 0.06     48,537  
  2004 Loan settlement   -     613,000   $ 0.07     45,000  
  2004 Consulting fee   -     360,000   $ 0.40     142,500  
  2004 Deferred cost (cancellation)   -     (1,300,000 ) $ 0.05     (65,000 )
  2005 Communications   -     56,000   $ 0.50     28,000  
  2005 Consulting fees   -     1,135,000   $ 0.29     333,700  
  2005 Legal fees   -     50,000   $ 0.50     25,000  
  2005 Loan conversion   -     635,901   $ 0.39     250,160  
  2005 Stock dividend   -     4,120,643   $ 0.65     2,678,418  
  2006 Finders’ fee   -     100,000   $ 0.40     40,000  
  2007 Consulting fees   -     700,000   $ 0.20     140,000  
  2008 Consulting fees   -     750,000   $ 0.07     52,000  
                             
        198,000     20,589,343         $ 6,530,725  

  These amounts have been excluded from the investing and financing activities of the statements of cash flows.


 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2012 and 2011
(Stated in U.S. Dollars)


6. Related Party Transactions – Notes 3 and 4

  The Company was charged the following by stockholders, directors, by companies controlled by directors and/or stockholders of the Company, and by companies with directors in common:

    Year ended December 31,     Cumulative from
 February 28,
 1989 (Date of
 Inception) to
 December 31,
 
    2012     2011     2012  
                   
Consulting fees $ 92,328   $ -   $ 341,371  
Interest   66,143     59,719     488,116  
Management fees   138,204     -     684,529  
Office and general   -     -     26,944  
Rent   -     -     130,232  
                   
  $ 296,675   $ 59,719   $ 1,671,192  

  At December 31, 2012, accounts payable includes $461,755 (2011 - $456,972) due to two directors of the Company and a company controlled by a director of the Company in respect of unpaid management fees and expenses incurred on behalf of the Company.

  At December 31, 2012, accounts payable also includes $15,527 (2011 - $15,527) of expenses for operating costs paid on behalf of the Company by a company with directors in common.

  The Company entered into two Management Services Agreements dated January 1, 2007 with a director and a company controlled by a director of the Company. Under the terms of these agreements they were each paid $7,500 per month, plus taxes where applicable, for management services. These agreements expired in 2008. At December 31, 2012 the Company owed $321,057 (2011 - $321,057) pursuant to the two Management Services Agreements. Subsequent to the year ended December 31, 2012, the accounts payable arising from these agreements were settled by common shares (Note 5(a)).

  On August 21, 2012 the Company entered into a Management Services Agreement with a director (the “Director”) and an arm’s length consultant (the “Consultant”), for a term of 12 months commencing on October 1, 2012. As remuneration for the management services the Company agreed to issue 320,000 restricted common shares to the Director, plus pay the Director $20 per hour for time spent on the affairs of the Company, pursuant to which the company has paid or accrued management fees of $2,060 (2011 – Nil). For services received in December 31, 2012, the Company has recognized share based compensation of $18,400. As of December 31, 2012 the shares had not been issued. In addition, the Company agreed to grant the Director 320,000 share purchase options, and recognized compensation expense of $73,184.

  In addition, the company cancelled 1,200,000 and issued 1,440,000 stock options to a company controlled by a director. The total stock based compensation including modification expense to the company amounted to $92,328. The company also cancelled and re-issued 1,200,000 and 100,000 options to two directors respectively. The stock base compensation modification expense of the options to these directors amounted to $37,440, and $3,120 respectively.


 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2012 and 2011
(Stated in U.S. Dollars)


7. Income Taxes

  The tax effects of temporary differences that give rise to deferred tax assets at December 31, 2012 and 2011 are presented below:

      December 31,  
      2012     2011  
               
  Net tax operating loss carryforwards $ 2,848,000   $ 2,658,000  
  Accrued liabilities   205,000     182,000  
  Gross deferred tax assets   3,053,000     2,840,000  
  Valuation allowance for deferred tax asset   (3,053,000 )   (2,840,000 )
               
    $ -   $ -  

  The Company evaluates its valuation allowance requirements based on projected future operations. When circumstances change and this causes a change in management’s judgment about the recoverability of deferred tax assets, the impact of the change on the valuation allowance is reflected in current income.

  At December 31, 2012, the Company has estimated accumulated non-operating losses of approximately $8,135,000 (2011 - $7,594,000) which may be carried forward to reduce taxation income in future years. The non-operating losses expire from 2017 to 2032.

  The potential benefits of the losses have not been recorded in the financial statements. As at December 31, 2012 the Company is in arrears on filing its statutory income tax returns and the amounts presented above are based on estimates. The actual losses available could differ from these estimates.

  The provision for income taxes differs from the result which would be obtained by applying the statutory income tax rate to the loss before income taxes as follows:

      December 31,  
      2012     2011  
               
  Loss for the year $ (608,529 ) $ (133,629 )
               
  Statutory income tax rate   35%     35%  
               
  Expected income tax recovery $ (213,000 ) $ (46,000 )
  Expiry of loss carryforward   -     3,000  
  Change in valuation allowance   213,000     43,000  
               
  Income tax expense $ -   $ -  


 

STRATEGIC INTERNET INVESTMENTS, INCORPORATED

(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2012 and 2011
(Stated in U.S. Dollars)


7. Income Taxes – (cont’d)

  All of the Company’s tax returns are subject to tax examinations until respective statue of limitation. The Company currently has no tax years under examination.

  The Company does not have an accrual for uncertain tax positions as of December 31, 2012 and 2011. If interest and penalties were to be assessed, the Company would charge interest to interest expense, and penalties to other operating expense. It is not anticipated that unrecognized tax benefits would significantly increase or decrease within twelve months of the reporting date.

  The Company’s tax filings are delinquent for all tax years since inception and are subject to audit by taxing authorities in jurisdictions where it conducts business. These audits may result in significant assessments of additional taxes, penalties and interest that are subsequently resolved with the authorities or potentially through the courts. Management believes the Company has adequately provided for any ultimate amounts that are likely to result from these audits; however, final assessments, if any, could be significantly different than the amounts recorded in the financial statements.

8. Subsequent Event

 
Subsequent to December 31, 2012, the Company:

  a) Received loans of $71,500 from a company controlled by directors of the Company.  These loans are unsecured, non-interest bearing, and repayable upon demand.

  b) Granted 2,940,000 share purchase options to directors and a consultant at an exercise price of $0.12 per common share, expiring on January 16, 2018. These options were granted in exchange for options cancelled in 2012 (see Note 4).

  c) Issued 1,100,000 restricted common shares pursuant to management services agreements, and consulting services agreements dated August 21, 2012 (see Note 4).

  d) Issued a total of 5,249,065 restricted common shares of the Company at $0.07 per share as settlement of accounts payable due to a director of the Company, a company controlled by a director of the Company, in respect of unpaid management and consulting fee debts totaling $350,215, plus a $17,220 debt owed to an arm’s length creditor.  Of this accounts payable settled, $321,057 was  pursuant to the two Management Services Agreements. Pursuant to the terms of these management services agreements, if the Company is unable to pay for the services, the consultant may elect to settle any portion of outstanding amounts plus interest with units of the Company.  Each unit shall consist of one common share and one share purchase warrant entitling the holder to purchase one additional common share of the Company.  The price for the units and warrants will be determined based on a discount to the 10 day average market price ranging from 50% to 60%, but no less than $0.05 per share.

  e) Entered into two consulting services agreements for a term of 12 months commencing on March 15, 2013. As remuneration for the consulting services the Company agreed to issue 1,200,000 restricted common shares to the consultants. These shares had not yet been issued.


 

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None

Disagreements With Accountants on Accounting and Financial Disclosure

Not applicable

ITEM 9A. CONTROLS AND PROCEDURES.

Disclosure controls and procedures

As required by Rule 13(a)-15 under the Exchange Act, in connection with this annual report on Form 10-K, under the direction of our Chief Executive Officer and Chief Financial Officer, we have evaluated our disclosure controls and procedures as of December 31, 2012, including the remedial actions discussed below, and we have concluded that, as of December 31, 2012, our disclosure controls and procedures were not effective.

It should be noted that while our management believes our disclosure controls and procedures provide a reasonable level of assurance, they do not expect that our disclosure controls and procedures or internal controls will prevent all error and all fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of internal control is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Internal control over financial reporting

Management is responsible for establishing and maintaining internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Our management evaluated, under the supervision and with the participation of our Chief Executive Officer, the effectiveness of our internal control over financial reporting as of December 31, 2012.

Based on its evaluation under the framework in Internal Control—Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission, our management concluded that our internal control over financial reporting was not effective as of December 31, 2012, due to the existence of significant deficiencies constituting material weaknesses, as described in greater detail below. A material weakness is a control deficiency, or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

Limitations on Effectiveness of Controls

Our Chief Executive Officer and Chief Financial Officer do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additional controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is 


 

based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Material Weaknesses Identified

In connection with the preparation of our financial statements for the year ended December 31, 2012, certain significant deficiencies in internal control became evident to management that represents material weaknesses, including:

  a) Insufficient segregation of duties in our finance and accounting functions due to limited personnel. During the year ended December 31, 2012, we had limited personnel that performed nearly all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statements. This creates certain incompatible duties and a lack of review over the financial reporting process that would likely result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC. These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected;

  b) Insufficient corporate governance policies. Although we have corporate governance policies which provides broad guidelines for corporate governance, our corporate governance activities and processes are not always formally documented. Specifically, decisions made by the board to be carried out by management should be documented and communicated on a timely basis to reduce the likelihood of any misunderstandings regarding key decisions affecting our operations and management; and

  c) Our company’s accounting personnel does not have sufficient technical accounting knowledge relating to accounting for income taxes and complex US GAAP matters. In consultation with our auditors, management corrected any errors prior to the release of our company’s December 31, 2012 financial statements.

The Company believes these material weaknesses are partially mitigated by: the active involvement of senior management and the board of directors in all the affairs of the Company; open lines of communication within the Company; the present levels of activities and transactions within the Company being readily transparent; the thorough review of the Company’s financial statements by management, and the board of directors. However, these mitigating factors will not necessarily prevent the likelihood that a material misstatement will not occur as a result of the aforesaid weaknesses in the Company’s internal controls over financial reporting. A system of internal controls over financial reporting, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the internal controls over financial reporting are met.

Plan for Remediation of Material Weaknesses

We intend to take appropriate and reasonable steps to make the necessary improvements to remediate these deficiencies. We intend to consider the results of our remediation efforts and related testing as part of our year-end 2013 assessment of the effectiveness of our internal control over financial reporting.

Subject to receipt of additional financing, we intend to undertake the below remediation measures to address the material weaknesses described in this annual report. Such remediation activities include the following:

  • We intend to continue to update the documentation of our internal control processes, including formal risk assessment of our financial reporting processes.

Changes in Internal Controls over Financial Reporting

There were no changes in our internal control over financial reporting during the fourth quarter of our fiscal year ended December 31, 2012 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.


 

ITEM 9B. OTHER INFORMATION.

None.


 

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

Name and position Age Term Business experience during past 5 years Other directorships
         
Abbas Salih
Chairman, President, CEO, CFO,
Director
66 March 7, 2001 to Present Director and officer of the Company. None
         
Ralph Shearing
Director
56 March 7, 2001 to Present Director of the Company, and two natural resource exploration company. Telson Resources Inc. and Foundation Resources Inc.; both are reporting issuers in Canada.
         
Fred Schultz
Director
53 August 20, 2012 to Present Director of the Company, and independent businessman None
         
Dr. Ralf Zabel
Vice-president - International Business
Development and Operations
52 September 18, 2008 to Present Officer of the Company, and independent businessman None

Abbas Salih, CEO, CFO, President, Director
Mr. Salih is a graduate of the Khartoum Technical Institute in the Sudan. He received his formal training while serving as a member of the Sudan Royal Air Force which included attendance at the British Royal Air Force Academy, Newton No. 9 in Nottingham, England, where he studied aircraft electronics and instrumentation.

Mr. Salih is a businessman and has conducted business in Europe, Middle East, and Canada most extensively in Germany and the Sudan, prior to 1994.   Since 1992 Mr. Salih has been a senior officer and director to the issuer and currently resides in Dubai, UAE.

Ralph Shearing, Director
Mr. Shearing is a Professional Geologist, has extensive experience in the management of public companies. In addition to being a director of the Company, since 1986 he has been the President and Chief Executive Officer of Soho Resources Corp, and a Director of Foundation Resources Inc. Both Soho and Foundation are Canadian reporting issuers listed on the Toronto Venture Exchange and their principal business activities consists of the acquisition and exploration of mineral properties. Soho Resources Corp. was renamed to Telson Resources Inc. in 2013. During the five years prior to September 2008, Mr. Shearing was the CEO and Secretary of the Company.

Fred Schultz, Director
Mr. Schultz is a businessman with 30 years of public relations and executive customer service in the United States.  He is VP of Regal Barrington, a capital markets advisory firm and a member of the National Investor Relations Institute (NIRI).  Mr. Schultz was instrumental in the 1999 opening of Regus Networks (formerly HQ Global Workplaces) in Carlsbad, CA as well as a consultant in the 2004 building of other executive office suites, Rancho Santa Fe Executive Suites in Encinitas, CA.

Dr. Ralf Zabel, Vice-president - International Business Development and Operations
Dr. Zabel is a resident of Germany and holds a Doctorate degree in Engineering from the University of Dresden, Germany.  Dr. Zabel has held senior positions with Construction, Engineering and Architectural firms in German since 1986.


 

Term of Office

The directors serve until their successors are elected by the shareholders.  Vacancies on the Board of Directors may be filled by appointment of the majority of the continuing directors. The executive officers serve at the discretion of the Board of Directors.

Family Relationships

There are no family relationships among directors, executive officers, officers or significant employees and any nominees chosen to hold these positions.

Significant Employees

We have no significant employees.

Involvement in Certain Legal Proceedings

Our directors, executive officers and control persons have not been involved in any of the following events during the past ten years:

1. any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
2. any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
3. being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
4. being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.

Audit Committee

As at the date hereof, the Audit Committee is comprised of Ralph Shearing and Abbas Salih.  Ralph Shearing is independent.  All of the members of the Audit Committee are “financially literate”. 

The text of the Audit Committee Charter is attached below:

Charter of the Audit Committee of the Board of Directors of Strategic Internet Investments, Incorporated (the “Company”)

Article 1 – Mandate and Responsibilities

The Audit Committee is appointed by the board of directors of the Company (the “Board”) to oversee the accounting and financial reporting process of the Company and audits of the financial statements of the Company.  The Audit Committee’s primary duties and responsibilities are to:

  (a) recommend to the Board the external auditor to be nominated for the purpose of preparing or issuing an auditor's report or performing other audit, review or attest services for the Company;

  (b) recommend to the Board the compensation of the external auditor;

  (c) oversee the work of the external auditor engaged for the purpose of preparing or issuing an auditor's report or performing other audit, review or attest services for the Company, including the resolution of disagreements between management and the external auditor regarding financial reporting;


 
  (d) pre-approve all non-audit services to be provided to the Company or its subsidiaries by the Company’s external auditor;

  (e) review the Company’s financial statements, 10-K (MD&A) and annual and interim earnings press releases before the Company publicly discloses this information;

  (f) be satisfied that adequate procedures are in place for the review of all other public disclosure of financial information extracted or derived from the Company’s financial statements, and to periodically assess the adequacy of those procedures;

  (g) establish procedures for:

  i. the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters; and

  ii. the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters; and

  (h) review and approve the Company’s hiring policies regarding partners, employees and former partners and employees of the present and former external auditor of the Company.

The Board and management will ensure that the Audit Committee has adequate funding to fulfill its duties and responsibilities.

Audit Committee Oversight

Since the commencement of the Company’s most recently completed fiscal year, the Company’s Board of Directors has not failed to adopt a recommendation of the Audit Committee to nominate or compensate an external auditor.

Pre-Approval Policies and Procedures

The Company has not adopted specific policies and procedures for the engagement of non-audit services.  The Audit Committee will review the engagement of non-audit services as required.

Audit Committee Financial Expert

Our board of directors has determined that it does not have an audit committee member that qualifies as an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K. We believe that the audit committee members are collectively capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. In addition, we believe that retaining an independent director who would qualify as an “audit committee financial expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development and the fact that we have not generated revenues to date.

Corporate Governance

The following is a summary of the Company’s corporate governance policies.

Board of Directors
The Board, at present, is composed of two directors, one of  whom is an executive officer of the Company and one of whom are considered to be “independent”, as that term is defined in applicable securities legislation.  Mr. Ralph Shearing is considered to be an independent director.  Mr. Abbas Salih, by reason of his being the President, CEO, and CFO of the Company, is not.  In determining whether a director is independent, the Board chiefly considers whether the director has a relationship which could, or could be perceived to interfere with the director’s ability to objectively assess the performance of management.

The Board is responsible for approving long-term strategic plans and annual operating plans and budgets recommended by management.  Board consideration and approval is also required for material contracts and business transactions, and all debt and equity financing transactions.


 

The Board delegates to management responsibility for meeting defined corporate objectives, implementing approved strategic and operating plans, carrying on the Company’s business in the ordinary course, managing the Company’s cash flow, evaluating new business opportunities, recruiting staff and complying with applicable regulatory requirements.  The Board also looks to management to furnish recommendations respecting corporate objectives, long-term strategic plans and annual operating plans.

Directorships

Certain of the directors of the Company are also directors of other registrant (or equivalent) in a jurisdiction or a foreign jurisdiction as follows:

Name of Director Other registrant (or equivalent in a foreign jurisdiction)
   
Ralph Shearing Telson Resources Inc. and Foundation Resources Inc (Reporting issuers – Canada)
Abbas Salih None
Fred Schultz None

Orientation and Continuing Education
The Company has not yet developed an official orientation or training program for new directors.  As required, new directors will have the opportunity to become familiar with the Company by meeting with the other directors and with officers and employees.  Orientation activities will be tailored to the particular needs and experience of each director and the overall needs of the Board.

Ethical Business Conduct
The Board monitors the ethical conduct of the Company and ensures that it complies with applicable legal and regulatory requirements, such as those of relevant securities commissions and stock exchanges.  The Board has found that the fiduciary duties placed on individual directors by the Company’s governing corporate legislation and the common law, as well as the restrictions placed by applicable corporate legislation on the individual director’s participation in decisions of the Board in which the director has an interest, have been sufficient to ensure that the Board operates independently of management and in the best interests of the Company.

Nomination of Directors
The Board has not appointed a nominating committee because the Board fulfills these functions.

Compensation
The Board of Directors is responsible for determining all forms of compensation, including long-term incentive in the form of stock options, to be granted to the Chief Executive Officer of the Company and the directors, and for reviewing the Chief Executive Officer’s recommendations respecting compensation of the other officers of the Company, to ensure such arrangements reflect the responsibilities and risks associated with each position.  When determining the compensation of its officers, the Board considers: i) recruiting and retaining executives critical to the success of the Company and the enhancement of shareholder value; ii) providing fair and competitive compensation; iii) balancing the interests of management and the Company’s shareholders; and iv) rewarding performance, both on an individual basis and with respect to operations in general.

Committees of the Board of Directors
The Board has appointed an Audit Committee, the members of which are Ralph Shearing and Abbas Salih.  A description of the function of the Audit Committee can be found in this under Item 15 – Principal Accountant Fees and Services.

The Board has not, as yet, adopted formal procedures for assessing the effectiveness of the Board, its Audit Committee or individual directors.

Code of Ethics

The Company has not adopted a Code of Ethics applicable to all of our directors, officers, employees and consultants, which is a “code of ethics” as defined by applicable rules of the SEC.


 

Section 16(a) Beneficial Ownership Compliance

Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file with the SEC initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the SEC regulations to furnish us with copies of all Section 16(a) reports that they file.

Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that all filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with.

Item 11.  Executive Compensation.

The particulars of compensation paid to the following persons:

  • our principal executive officer;
  • each of our two most highly compensated executive officers who were serving as executive officers at the end of the year ended December 31, 2012; and
  • up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the most recently completed financial year,

who we will collectively refer to as the named executive officers, for our years ended December 31, 2012 and 2011, are set out in the summary compensation table.

  Summary compensation table (aside from what is set out below, there is no other compensation to the individuals in respect of 2012 and 2011):

        Option     Share Awards        
  Name Year   Awards(1)     and Other(2)     Total  
                       
  Ralph Shearing Director 2012 $ 92,328(3)   $ Nil   $ 92,328  
    2011 $ Nil   $ Nil   $ Nil  
                       
  Abbas Salih
CEO, CFO, Director
2012 $ 37,440(4)   $ Nil   $ 37,440  
    2011 $ Nil   $ Nil   $ Nil  
                       
  Fred Schultz, Director 2012 $ 73,180(5)   $ 24,460   $ 97,640  
    2011 $ Nil   $ Nil   $ Nil  
                       
  Dr. Ralf Zabel
Vice-president - International Business
Development and Operations
2012 $ 3,120(6)   $ Nil   $ 3,120  
    2011 $ Nil   $ Nil   $ Nil  

  (1) The amount of the Option Awards represents the fair value of the stock options granted and recognized for financial reporting purposes during the year indicated.  For a description of the methodology and assumptions used in valuing the option awards granted to our named executive officers and directors during the year ended December 31, 2012, please review Note 4 to the financial statements for the year ended December 31, 2012.

  (2) The amount of Share Awards is the fair value of common shares issued as remuneration to the named executive officers plus common shares issued as remuneration.  For a description of the methodology and assumptions used in valuing the share awards granted to our named executive officers and directors during the year ended December 31, 2012, please review Note 4 to the financial statements for the year ended December 31, 2012. Share awards to Fred Schultz related to the Management Services Agreement dated August 21, 2012.


 
  (3) In 2008, the Company granted 1,200,000 sharepurchase options to Ralph Shearing at the closing price of the Company’s commonstock on the date of the grants or $0.15. The options were granted with a termof 5 years. All of these options were cancelled in 2012. During the year endedDecember 31, 2012, the Company granted 1,440,000 (2011 – $Nil) vested sharepurchase options entitling him to acquire 1,440,000 (2011 – Nil) common sharesat $0.10 per share, which was $0.13 lower than the Company’s common stock priceon the date of grant. These stock option granted were deemed to be part of astock option modification relating to the 2012 stock cancellation. The totalincremental compensation resulting from the modification was $37,440. Thecompensation resulting from the additional 240,000 options was $54,888.

  (4) In 2008, the Company granted 1,200,000 sharepurchase options to Abbas Salih at the closing price of the Company’s commonstock on the date of the grants or $0.15. The options were granted with a termof 5 years. All of these options were cancelled in 2012. During the year endedDecember 31, 2012, the Company granted 1,200,000 (2011 – $Nil) vested sharepurchase options entitling him to acquire 1,200,000(2011 – Nil) common sharesat $0.10 per share, which was $0.13 lower than the Company’s common stock priceon the date of grant. These stock option granted were deemed to be part of astock option modification relating to the 2012 stock cancellation. The totalincremental compensation resulting from the modification was $37,440.

  (5) The Company granted 320,000 options to FredSchutlz with a term of 5 years (2011 – N/A) expiring on October 15, 2017. TheCompany has charged a total of $73,180 (2011 - $Nil) to management fees on thestatement of operations as compensation expense, including the modificationexpense, for share purchase options awarded during the period ended December31, 2012.

  (6) In 2008, the Company granted 100,000 sharepurchase options to Ralf Zabel at the closing price of the Company’s commonstock on the date of the grants or $0.15. The options were granted with a termof 5 years. All of these options were cancelled in 2012. During the year endedDecember 31, 2012, the Company granted 100,000 (2011 – $Nil) vested sharepurchase options entitling him to acquire 100,000 (2011 – Nil) common shares at$0.10 per share, which was $0.13 lower than the Company’s common stock price onthe date of grant. These stock option granted were deemed to be part of a stockoption modification relating to the 2012 stock cancellation. The totalincremental compensation resulting from the modification was $3,120.

Management Contracts

On January 1, 2007 the Company entered into two Management Services Agreements with Abbas Salih, a director of the Company, and a company controlled by Ralph Shearing, a director of the Company.  Under the terms of these agreements they were each paid $7,500 per month, plus taxes where applicable, for management services. Effective September 12, 2008, the agreement with the company controlled by Ralph Shearing was terminated. The agreement with Abbas Salih expired on December 31, 2008 and was not renewed.

The Company owed $350,215 pursuant to the two Management and Consulting Services Agreements. Pursuant to the terms of these agreements, if the Company is unable to pay for the services, the consultant may elect to settle any portion of outstanding amounts plus interest with units of the Company.  Each unit shall consist of one common share and one share purchase warrant entitling the holder to purchase one additional common share of the Company.  The price for the units and warrants will be determined based on a discount to the 10 day average market price ranging from 50% to 60%, but no less than $0.05 per share. In October 2012, all parties to these Management Services Agreements agreed to waive the right to settle the outstanding debts arising from these agreements through the issuance of units. Instead, all parties agreed to settle these debts through the issuance of 5,003,065 restricted common shares at a price of $0.07 per share.

On August 21, 2012 the Company entered into a Management Services Agreement with a director (the “Director”) and an arm’s length consultant (the “Consultant”), for a term of 12 months commencing on October 1, 2012.  As partial remuneration for the management services the Company agreed to issue 320,000 restricted common shares to the Director, and 480,000 restricted common shares to the Consultant. 25% of this obligation has been recognized in year ended December 31. 2012 and the remaining 75% will be recognized in the 2013 fiscal year. These shares were issued subsequent to the year-end December 31, 2012.


 

During the fiscal year ended December 31, 2012, directors and officers received compensation for acting in their capacities as a director or officer, in the amounts as shown above (see “Summary compensation table”).  The directors and officers are reimbursed for any out-of-pocket expenses incurred by them on behalf of the Company.

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may receive stock options at the discretion of our board of directors in the future. We do not have any material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of our board of directors from time to time.  We have no plans or arrangements in respect of remuneration received or that may be received by our executive officers to compensate such officers in the event of termination of employment (as a result of resignation, retirement, change of control) or a change of responsibilities following a change of control.

Outstanding Equity Awards at Fiscal Year-End

On July 1, 2002 the Company's Board of Directors adopted and approved a Stock Award Plan. The plan provides both for the direct award or sale of shares, and for the grant of options to purchase shares. Shares may be awarded in consideration of services rendered to the Company. The Company may also grant a 30-day right to purchase shares at a price of not less than 90% of the fair market value of the shares.

Under the plan directors, employees and consultants may be granted incentive stock options to purchase common stock of the Company at a price of not less than 100% of the fair market value of the stock.  Outside directors may be granted non-statutory stock options to purchase common stock of the Company at a price of not less than 85% of the fair market value of the stock.  

The total number of shares awarded under the plan must not exceed 15% of the outstanding common stock of the Company.  Certain changes in the capital structure of the Company, such as a stock split or stock dividend, may result in an appropriate adjustment to the number and/or the price of shares issuable under the plan. The plan expires on July 1, 2017.

The purpose of the Stock Option Plan is to advance the interests of the Company and its shareholders by affording key personnel in the Company an opportunity for investment in the Company and other incentive advantages inherent in stock ownership in the Company.  Pursuant to the provisions of the Stock Option Plan, stock options will be granted only to key personnel of the Company, generally defined as a person designated by management upon whose judgment, initiative and efforts the Company may rely, including any director, officer, employee or consultant of the Company.

As of the date of this Annual Report, a total of 4 individual share purchase options have been granted to consultants, employees, directors, and officers to acquire a total of 1,200,000 common shares of the Company at a weighted average price of $0.10 per share.


 

The outstanding equity awards of the named executive officers, for our year ended December 31, 2012, are set out in the following outstanding equity awards table:

Name Number of securities
underlying
unexercised options
# exercisable
Option
exercise price
Options
expiration date
       
Abbas Salih
CEO, CFO, Director
- - -
       
Ralph Shearing
Director
- - -
       
Fred Schultz
Director
320,000 $0.10 October 15, 2017
       
Dr. Ralf Zabel
Vice-president - International Business
Development and Operations
100,000 $0.10 October 15, 2017

All of these options were vested and exercisable on the date they were granted. None have been exercised.

Aggregated Options Exercised in the Year Ended December 31, 2012 and Year End Option Values

There were no stock options exercised during the year ended December 31, 2012.

Repricing of Options/SARS

There were no stock options re-priced during the year ended December 31, 2012.

Director Compensation

We reimburse our directors for expenses incurred in connection with attending board meetings.  We did not pay any other director’s fees or other compensation for services rendered as a director for the fiscal year ended December 31, 2012.

We have no formal plan for compensating our directors for their service in their capacity as directors, although such directors have been granted stock options, and may in the future receive additional stock options to purchase common shares as awarded by our board of directors or (as to future stock options) a compensation committee which may be established.  Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors.  Our board of directors may award special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director.  Other than stock options, no director received and/or accrued any compensation for their services as a director, including committee participation and/or special assignments.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

As of March 31, 2013, there were 33,959,391 shares of our common stock outstanding.  The following tables sets forth certain information known to us with respect to the beneficial ownership of our common stock as of that date by (i) each of our directors, (ii) each of our named executive officers, and (iii) all of our directors and executive officers as a group.  Except as set forth in the tables below, there is no person known to us who beneficially owns more than 5% of our common stock.


 

Security ownership of certain beneficial owners and management

Title of class Name and address of beneficial owners(1) Amount and nature of beneficial ownership Percentage of class(2), (3)
       
Management      
Common stock Ralph Shearing 8,727,354 (indirect)(4) 23%
  250-1090 W. Georgia St.    
  Vancouver, BC, Canada    
       
Common stock Abbas Salih 22,395,471 (indirect)(5) 59%
  Nisar Square, Benyas Centre
Office No. 207
P.O. Box 40088,
Dubai, United Arab Emirates
   
       
Common stock Fred Schultz 640,000 (direct)(6) 2%
  1706 Serrano St.    
  Oceanside, CA 92054    
       
Common stock Ralf Zabel 160,000 (direct)(7) *%
  Shulstrasse 18 D-01723    
  Kesseldorf, Germany    
Management total   31,922,825 84%
       
Beneficial owners      
Common stock Cede & Co. 8,533,765 (direct) 16%
  PO Box 20, Bowling Green Station    
  New York, N.Y., U.S.A.    

  (1) Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.

  (2) The percentage of class is based on 33,959,391 shares of common stock issued and outstanding as of March 31, 2013, plus shares of common stock subject to options or warrants currently exercisable or convertible, or exercisable or convertible within 60 days of March 31, 2012.

  (3) * Less than 1%

  (4) The beneficial owner has the right to acquire 1,440,000 shares through the exercise of stock options and 2,320,858 units through the conversion of outstanding loans into units, each unit consisting of one common share of the Company and one share purchase warrant.

  (5) The beneficial owner also has the right to acquire a further 1,200,000 shares through the exercise of stock options and 4,526,436 units through the conversion of outstanding loans into units, each unit consisting of one common share of the Company and one share purchase warrant.

  (6) The beneficial owner has the right to acquire 320,000 shares through the exercise of stock options.

  (7) The beneficial owner has the right to acquire 100,000 shares through the exercise of stock options.

Changes in Control

None


 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Transactions with related persons

No director, executive officer, principal shareholder holding at least 5% of our common shares, or any family member thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction, since the beginning of our company’s fiscal year ended December 31, 2012, in which the amount involved in the transaction exceeded or exceeds the $120,000, except as described below.

The Company was charged by the following directors, officers, companies controlled by directors and/or stockholders of the Company, and by companies with directors in common:

    Year ended December 31,  
    2012     2011  
             
Consulting fees $ 92,328     -  
Interest $ 66,143   $ 59,719  
Management fees $ 138,204     -  

At December 31, 2012, accounts payable includes $461,755 (2011 - $456,972) due to two directors of the Company and a company controlled by a director of the Company in respect of unpaid management fees and expenses incurred on behalf of the Company.

At December 31, 2011, accounts payable also includes $15,527 (2011 - $15,527) of expenses for operating costs paid on behalf of the Company by a company with directors in common. 

The Company entered into two Management Services Agreements dated January 1, 2007 with a director and a company controlled by a director of the Company.  Under the terms of these agreements they were each paid $7,500 per month, plus taxes where applicable, for management services.  These agreements expired in 2008. At December 31, 2012 the Company owed $321,057 (2011 - $321,057) pursuant to the two Management Services Agreements. The Company agreed to issue a total of 5,003,065 restricted common shares of the Company at $0.07 per share as settlement of accounts payable due to a director of the Company, and a company controlled by a director of the Company, in respect of the unpaid management and consulting fee debts totaling $350,206. These shares were issued subsequent to the year-end December 31, 2012.

On August 21, 2012 the Company entered into a Management Services Agreement with a director (the “Director”) and an arm’s length consultant (the “Consultant”), for a term of 12 months commencing on October 1, 2012. As remuneration for the management services the Company agreed to issue 320,000 restricted common shares to the Director, plus pay the Director $20 per hour for time spent on the affairs of the Company, pursuant to which the company has paid or accrued management fees of $2,060 (2011 – Nil). In addition, the Company agreed to grant the Director 320,000 share purchase options. As of December 31, 2012 the shares had not been issued.

Director Independence

The Board, at present, is composed of three directors, one of whom is an executive officer of the Company and the other two are considered to be “independent”, as that term is defined in applicable securities legislation.  Mr. Fred Schultz and Mr. Ralph Shearing are considered to be independent directors.  Mr. Abbas Salih, by reason of his being the President, CEO, and CFO of the Company, is not.  In determining whether a director is independent, the Board chiefly considers whether the director has a relationship which could, or could be perceived to, interfere with the director’s ability to objectively assess the performance of management.

Board of Directors

Our board of directors facilitates its exercise of independent supervision over management by endorsing the guidelines for responsibilities of the board as set out by regulatory authorities on corporate governance in the United States.  Our board’s primary responsibilities are to supervise the management of our company, to establish an appropriate corporate governance system, and to set a tone of high professional and ethical standards. 


 

The board is also responsible for:

  • selecting and assessing members of the Board;
  • choosing, assessing and compensating the Chief Executive Officer of our company, approving the compensation of all executive officers and ensuring that an orderly management succession plan exists;
  • reviewing and approving our company’s strategic plan, operating plan, capital budget and financial goals, and reviewing its performance against those plans;
  • adopting a code of conduct and a disclosure policy for our company, and monitoring performance against those policies;
  • ensuring the integrity of our company’s internal control and management information systems;
  • approving any major changes to our company’s capital structure, including significant investments or financing arrangements; and
  • reviewing and approving any other issues which, in the view of the Board or management, may require Board scrutiny.

Orientation and Continuing Education

We have an informal process to orient and educate new recruits to the board regarding their role of the board, our committees and our directors, as well as the nature and operations of our business.  This process provides for an orientation with key members of the management staff, and further provides access to materials necessary to inform them of the information required to carry out their responsibilities as a board member. This information includes the most recent board approved budget, the most recent annual report, the audited financial statements and copies of the interim quarterly financial statements.

The board does not provide continuing education for its directors.  Each director is responsible to maintain the skills and knowledge necessary to meet his or her obligations as directors.

Nomination of Directors

The board is responsible for identifying new director nominees.  In identifying candidates for membership on the board, the board takes into account all factors it considers appropriate, which may include strength of character, mature judgment, career specialization, relevant technical skills, diversity and the extent to which the candidate would fill a present need on the board.  As part of the process, the board, together with management, is responsible for conducting background searches, and is empowered to retain search firms to assist in the nominations process.  Once candidates have gone through a screening process and met with a number of the existing directors, they are formally put forward as nominees for approval by the board.

Assessments

The board intends that individual director assessments be conducted by other directors, taking into account each director’s contributions at board meetings, service on committees, experience base, and their general ability to contribute to one or more of our company’s major needs.  However, due to our stage of development and our need to deal with other urgent priorities, the board has not yet implemented such a process of assessment.


 

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit fees

The aggregate fees billed for the two most recently completed fiscal periods ended December 31, 2012 and December 31, 2011 for professional services rendered by BDO Canada LLP, Chartered Accountants, for the audit of our annual financial statements, quarterly reviews of our interim financial statements and services normally provided by the independent accountant in connection with statutory and regulatory filings or engagements for these fiscal periods were as follows:

  Year Ended
December 31, 2012
Year Ended
December 31, 2011
Audit Fees $45,633 $47,627
Audit Related Fees Nil Nil
Tax Fees Nil Nil
All Other Fees Nil Nil
Total $46,633 $47,627

In the above table, “audit fees” are fees billed by our company’s external auditor for services provided in auditing our company’s annual financial statements for the subject year along with reviews of interim quarterly financial statements. “Audit-related fees” are fees not included in audit fees that are billed by the auditor for assurance and related services that are reasonably related to the performance of the audit review of our company’s financial statements. “Tax fees” are fees billed by the auditor for professional services rendered for tax compliance, tax advice and tax planning. “All other fees” are fees billed by the auditor for products and services not included in the foregoing categories.

Policy on Pre-Approval by Audit Committee of Services Performed by Independent Auditors

The board of directors pre-approves all services provided by our independent auditors.  All of the above services and fees were reviewed and approved by the board of directors either before or after the respective services were rendered.

The board of directors has considered the nature and amount of fees billed by BDO Canada LLP and believes that the provision of services for activities unrelated to the audit is compatible with maintaining BDO Canada LLP.


 

PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

Table of Exhibit Items Description Exhibit
     
601-3(i) Articles of Incorporation Note 1
601-(3)(ii) Bylaws Note 1
601-(3)(iii) Certificate of Amendment Note 1
601-(10) Stock Award Plan Note 2
601-(31) Rule 13a-14(a)/15d-14(a) Certifications Exhibit 31.1
601-(32) Section 1350 Certifications Exhibit 32.1
     
     
Note 1: Incorporated by reference to Form 10-KSB Annual Report for the year ending December 31, 2001  
Note 2: Incorporated by reference to Form 10-KSB Annual Report for the year ending December 31, 2002  

SIGNATURES

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

      Strategic Internet Investments, Incorporated
       
Date: April 12, 2013   /s/ Ralph Shearing
      Ralph Shearing, Director
       
Date: April 12, 2013   /s/ Abbas Salih
      Abbas Salih, CEO, CFO, Director